Benpres creditors scramble for more collateral

Despite assurances by company executives, the creditors of the Lopez Group have begun scampering for more cover on their loans, anticipating more trouble for the group’s flaship company, Benpres Holdings Inc.

The exposure of banks in the troubled group was estimated to reach $596 million or P30.87 billion, accounted for mainly by two biggest affiliates: Maynilad Water Services and Bayan Telecommunications, Inc. (BayanTel).

Benpres’ creditors, led by Equitable PCI Bank, have been pressing the Lopez Group to align more assets to cover their maturing loans long before the group started defaulting on its long-term commercial papers (LTCPs)

"It is not unique to Equitable PCI," said bank president Rene Buenaventura. "We have all been anticipating it [defaults]. So it came as no surprise."

According to Buenaventura, the Lopez Group itself has been sending feelers that it was "having problems." The immediate reaction of most banks, he said, was to ask for more collateral.

Buenaventura said Equitable-PCI’s efforts to mobilize better loan cover out of the Lopezes was "satisfactory." He said the bank was able to raise its loan cover to 80 percent.

"I don’t want to reveal anything more because there are a lot of other banks involved and I don’t know what they were able to do," he said.

The Bangko Sentral ng Pilipinas (BSP) has been monitoring the unfolding events in the Lopez group of companies although officials are quick to deny that they were edgy over the extent of the fallout in case the conglomerate did collapse.

The default on the interest payments on the firm’s commercial papers meant that similar debt papers issued by the company were likely to suffer the same fate, since CPs normally provide for a cross-default setting.

This meant that a default on one issue would be a default on the rest.

"We are quietly inquiring on the status of the Lopez group loans," said an official.

"The problem for most banks is that most of the loans are clean."

Benpres’ liabilities stem from the guarantee it had extended to its subsidiaries such as BayanTel, Maynilad and the Manila North Tollway Corp. Benpres enlisted the services of Credit Suisse. First Boston in the second half of last year to improve the company’s long term financial position.