Globe poised to take over Bayan

MANILA, Philippines - Globe Telecom Inc., a joint venture between diversified conglomerate Ayala Corp. and Singapore Telecom, is poised to take over debt-ridden Bayan Telecommunications Inc. of the Lopez family.

In a disclosure to the Philippine Stock Exchange (PSE), Globe assistant corporate secretary Marisalve Ciocson-Co said the company has commenced separate discussions with the controlling shareholders of Bayan regarding a wide range of commercial arrangements including a potential acquisition by Globe of an equity interest in the cash-strapped company.

“The parties remain in discussions on the terms of the commercial arrangements including the price and other conditions under which the acquisition may be effected,” she stressed.

She pointed out that the approval of the National Telecommunications Commission (NTC) is required to complete the acquisition.

She added that no definitive agreement has been executed at this time with Bayan.

As early as August, Lopez Holdings Corp. president Salvador G. Tirona confirmed that the Lopez group remains open to selling its telecommunications business that has been under rehabilitation since July 2004 after its debt swelled to $325 million.

Bayan has reportedly settled a total of P8.19 billion in total debt since it filed for corporate rehabilitation in 2004. In the first nine months of the year, the company paid P908.3 million worth of debt.

According to Ciocson-Co, Globe has obtained internal approvals to commence offers to purchase up to 100 percent of the financial obligations of Bayan and Radio Communications of the Philippines Inc.

Under the tender offer, Globe intends to purchase any and all of the 13.5 percent senior notes amounting to $200 million and is originally due 2006 issued by Bayan. The offer is scheduled to expire on Dec. 18.

The remaining principal amount of the senior notes amounted to $184.5 million or $922.39 per $1,000 original principal amount of notes based on the rehabilitation plan of Bayan.

Under the tender offer, Globe is willing to pay $280 if the acceptance level is less than 75 percent, $290 if the level is greater than 75 percent but less than 80 percent, $300 if the level is greater than 80 percent but less than 85 percent, $310 if the acceptance level is greater than 85 percent.

The debt-ridden telco provider had been subject to court-supervised rehabilitation proceedings since 2003 and intends to pay its $325 million outstanding debt within 2023.

Ciocson-Co said Globe has likewise obtained internal approvals to enter into an agreement with certain creditors holding a significant portion of the total debt whereby such creditors have committed to participate in the debt offers and for Globe to purchase such debt.

She added that the outstanding debt of Bayan would remain under the jurisdiction of the rehabilitation court after the completion of the tender offer.

The bondholders of Bayan included Avenue Asia Investments LP., Avenue Asia International, Ltd., Avenue Asia Special Situations Fund II, L.P., Avenue Asia Capital Partners, L.P., and Van Eck Global Opportunity Masterfund, Ltd.  Domestic creditors include the Development Bank of the Philippines, the United Coconut Planters Bank, and the Land Bank of the Philippines.

In a separate statement, Globe chief financial officer Albert de Larrazabal said in a statement that the company is making a tender offer to acquire at least 70 percent of the $200 million outstanding debt of Bayan.

“The tender offer is representative of Globe’s belief in the value of Bayan as a nationally enfranchised entity,” de Larrazabal stressed.

If the tender offer succeeds, he pointed out that Globe would become the major creditor of the company and would perform a role similar to current roles of Bayan’s creditors in respect to its rehabilitation plan.

“Potentially combining Globe’s assets and capabilities with Bayan through collaborative business efforts will enable both companies to become more competitive and help accelerate the completion of its rehabilitation,” he added.

The National Telecommunications Commission (NTC) also recently approved Globe’s application for the joint use by Globe and Bayan of the frequencies 1750-1760MHz/1845-1855MHz assigned to Bayan.

“Our long term collaboration with Bayan is a strategic initiative that will enable Bayan to unlock and maximize the potential of its key business assets and capabilities. I believe this is consistent with the objectives of the NTC, and is in the best interests of Bayan’s stakeholders and customers,” he said.