Maynilad creditors told to submit comments on deal

A Quezon City court has given creditors of Maynilad Water Services Inc. and other concerned parties until April 13 to comment on the compromise agreement between the debt-ridden water utility firm and the Metropolitan Waterworks and Sewerage System (MWSS).

The Quezon City Regional Trial Court is hearing the petition for corporate rehabilitation filed by Maynilad in November last year.

In a recent television interview, Maynilad counsel Helena Calo said the Department of Justice is soliciting comments to improve the compromise agreement pending before the court.

The MWSS-Maynilad deal was submitted to the court on March 18 to replace Maynilad’s original rehabilitation plan.

Under the rehabilitation plan, Maynilad proposed that all its liabilities be restructured and repaid over a period of nine years.

On the other hand, the compromise agreement calls for a two-part solution to Maynilad’s dilemma.

The first part involves Maynilad’s reorganization and that its parent firms Benpres Holdings Corp. and Suez-Ondeo would write off $134 million of their original investment and P1 billion of advances to the water utility firm.

It would also convert a portion of Maynilad’s debt to equity, with the consent of creditors.

In the second part, $50 million would be drawn on Maynilad’s performance bond and the restructuring of all its remaining debt for seven to eight years.

The write-off of $134 million in equity and P1 billion in advances by Benpres and French partner Suez-Ondeo eliminates Maynilad’s accumulated losses caused by the drastic depreciation of the peso against the dollar.

In converting some debt to equity, Maynilad’s majority ownership would be transferred to the government, significantly reducing the water utility’s debt.

This gives the government a free hand to reconfigure the concession.

Under the compromise deal, the government will take over Maynilad in lieu of unpaid concession fees of about P8 billion.

It will receive a 61 percent stake in Maynilad, Suez will own 30 percent, Metrobank will hold three percent, and employees will own 6 percent.

Maynilad was forced to file a rehabilitation petition with the court after it was ordered by a Paris-based arbitration panel to pay its overdue amount last year.

Justice Undersecretary Manuel Teehankee, who is also acting Government Corporate Counsel, said the reorganization preserves the government’s financial interest and avoids any of the risks associated with terminating the concessionaire and taking over Maynilad.

These risks include the difficulty of locating a qualified replacement operator to assume the concessionaire under the unattractive financial circumstances of Maynilad, the payment of the early termination amount to Maynilad as per concession agreement, which, net of the P6.6 billion concession bond, is insufficient to cover the annual debt service of concession fee loans, he added.

Among Maynilad’s creditors that are expected to file their comments with the court are Citibank N.A., JP Morgan, Credit Lyonnais Manila Offshore Branch, Fortis Bank N.V., KBC Bank, Development Bank of the Philippines, BNP Paribas, Credit Industriel et Commercial, Rizal Commercial Banking Corp., International Commerce Bank of China, Equitable PCI Bank, Barclays Bank, UFJ Bank, Bangkok Bank, Plc; CDC Finance-CDC IXIS, Chang Hwa Commercial Bank, Ltd. (Singapore Branch), Chinatrust (Phils.) Commercial Bank Corp., United World Chinese Commercial Bank and EastWest Bank.