Court allows PT&T-led Retelcom to suspend debt payments

MANILA, Philippines - The Makati Regional Trial Court has allowed the suspension of all claims against the Republic Telecommunications Holdings Co. (Retelcom) Group of Companies as well as payments by the latter, including disposition of company property.

Retelcom and its subsidiaries Philippine Telegraph and Telephone Corp. (PT&T), Philippine Wireless Inc. (PWI), Capitol Wireless Inc. (CWI) and Wavenet Philippines Inc. (WPI) earlier filed a petition with the court for corporate rehabilitation. 

The court appointed Atty. Pamela Labayen as rehabilitation receiver and ordered a stay of all claims against the Retelcom Group. It also prohibited the group from making any payment of its outstanding liabilities, as well as suppliers of Retelcom from withholding supply of goods or services, and the company from disposing or encumbering any of its properties. 

PT&T, PWI and CWI are 77 percent, 60 percent and 70 percent owned by Retelcom, respectively. WPI is 100 percent owned by CWI. Part of the obligations and indebtedness of PT&T, PWI, and CWI are guaranteed by Retelcom. 

Retelcom’s current assets amount to P608.9 million while its current liabilities are at P1.1 billion. 

The Retelcom Group has proposed a 15-year rehabilitation plan, the objectives of which are: first, the transformation of the group into one of the leading providers of broadband wireless access for next generation broadband communications services; second, the orderly settlement of obligations through debt-to-equity conversion of outstanding liabilities, including suppliers’ credits and short-term working capital loans approved by the creditors similar to debtor-in-possession financing into serial preferred shares of the subsidiary companies redeemable at full value on the 15th year; and third, settling statutory obligations and ensuring business continuity as a going concern in the interim through suppliers’ and DIP-type financing arrangements.

The board of publicly-listed PT&T earlier passed a resolution to file with the Makati RTC a petition for corporate rehabilitation jointly with CWI, Retelcom, PWI and WPI in a bid to seek protection from the court against creditors who may scramble for its assets once the cash-strapped company suspends payments on its liabilities.

Its cash flow for the nine months to March this year was at a negative P65 million, resulting in a net loss of about P88 million.

Based on its latest financial report, PT&T’s revenues were on the decline as the company suspended its local exchange carrier business, which offered basic telephone services such as local calls, international and domestic long-distance calls and texting.

In July 2008, PT&T ceased the operations of its local exchange carrier service in Laguna and Rizal to mitigate losses and to pave the way for a network upgrade. The company has also been complaining about worsening cable theft.

To cope with the decline in telegraphy and telex services that PT&T dominated in the 1970s and 1980s, the company diversified by offering gift-accompanied social telegrams, money transfers, and e-business derivatives like “e-Sulat” and “e-Store” in the Click & Call stations.

Trading of PT&T’s shares has been suspended at the local stock exchange since 2004.