Rehab court asked to restructure Bayantel debt

MANILA, Philippines - Ayala-led Globe Telecom Inc. has started the take-over process of cash strapped Bayan Telecommunications Inc. (Bayantel) of the Lopez Group as both companies agreed to seek the restructuring of a $423.3 million debt to prevent default.

In a joint disclosure to the Philippine Stock Exchange (PSE), Globe compliance officer Marisalve Ciocson-Co and Lopez Holdings Corp. corporate secretary Enrique Quiason said both Globe and Bayan Telecommunications Holdings Corp. filed a motion yesterday before the rehabilitation court seeking to restructure the financial obligations of Bayantel.

“The motion seeks to significantly restructure Bayantel’s financial debt to prevent the recurrence of default and ensure Bayantel’s continued viability. The joint motion is intended to achieve a successful rehabilitation of Bayantel at the earliest possible date,” both listed companies told the PSE.

Bayantel has reportedly settled a total of P8.19 billion in total debt since it filed for corporate rehabilitation in 2003.  It had been subject to supervised rehabilitation proceedings under the regional trial court in Pasig City and intends to pay its $325 million outstanding debt within 2023.

The current outstanding principal amount of Bayantel’s debt stood at $423.3 million and would be reduced to $131.3 million upon a full debt-to-equity conversion with the Lopezes as part of the restructuring.

Under the planned restructuring, Globe would convert up to 69 percent of the current outstanding debt into Bayantel shares.

“Bayantel’s operations have not generated sufficient revenue to continue making the debt payments under its existing rehabilitation plan.  This has been attributed to a decline in revenue from traditional fixed line services offered by Bayantel, increasing competitive pressures in the telecommunications industry and Bayantel’s inability to make any considerable capital investments while under its high debt burden,” Quiason said in a disclosure.

On the other hand, Ciocson-Co said Globe currently holds approximately 96.5 percent of the total financial indebtedness of Bayantel following a successful tender offers for the Bayantel debt late last year.

By acquiring the Bayantel debt, she explained that Globe sought to enable Bayantel’s continued viability as a telecommunications provider.

Such a restructuring, she added, would allow Globe to further strengthen collaborative efforts with Bayantel in respect of their local exchange networks, corporate data and broadband businesses.

“Ensuring that Bayantel remains a growing concern would allow both companies to become more competitive in the current industry environment.  On the part of Bayantel, a restructuring of its debt and the entry of Globe as a shareholder as well as a creditor will enable Bayantel to unlock and maximize potential of its key business assets and capabilities, and help accelerate its rehabilitation,” she added.

Earlier, Globe chief financial officer Alberto de Larrazabal said the company is looking at completing the take-over of Bayantel within the year to pave the way for an early exit from the ongoing rehabilitation program.

The acquisition would entail the approval from the rehabilitation court as well as the state-run National Telecommunications Commission (NTC) since it would involve the change in ownership.