BSP looks into banks’ exposure in Benpres

The Bangko Sentral ng Pilipinas (BSP) is looking into the total exposure of the banking sector in the Lopez-owned Benpres Holdings Inc. to determine how large a hit banks would take should the troubled company’s financial condition deteriorate further.

Sources revealed that the central bank was concerned enough to want to find out the magnitude of the crisis that could land on its lap, especially after Benpres defaulted for the second time on the interest payment on its long term commercial papers (LTCPs).

Benpres announced that it would not be able to pay interest charges amounting to P19.61 million on its LTCPs that fell due last week, after defaulting once before on its LTCP interest payments last June 17 and on its 7.875-percent Euronotes due last June 19.

As of end-2001, Benpres had P2 billion in outstanding LTCPs and the equivalent of P7.754 billion worth of five-year Euronotes, issued in 1997 and listed at the Luxembourg Stock Exchange.

Already, creditors of the entire Lopez group have begun scampering for more cover on their loans despite assurances by company executives.

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

According to the source, however, the BSP wanted to validate these figures to be able to anticipate the size of the hit in the event the situation worsens.

Benpres issued P3 billion in LTCPs in 1996 to finance its investments in real property development, telecommunications, infrastructure projects and power-related projects of its subsidiaries and affiliates.

But with nearly $597 milllion (approximately P31 billion) in total debts (about a third or over $200 million falling due this year) and a significant revenue drought due to some poorly performing subsidiaries, Benpres is hard-pressed to explore a number of options to unburden itself from the debt load and restore its long-term financial health.

Helped along by New York-based Credit Suisse First Boston, BHC hatched a Balance Sheet Management Plan to address its maturing financial obligations as well as restore its long-term financial health.

The plan would require the reduction of debt, sale of non-core assets to raise cash and a moratorium on further investments and capital calls on its infrastructure projects.