The agency’s Corporation Finance Department (CFD) has recommended to the commission en banc that a three-man team composed of a lawyer and two certified public accountants be formed to lead a formal probe "to finally determine and to have a complete picture of the financial affairs of Piltel."
The CFD said the probe would focus on two concerns which remain unresolved, following Piltel’s failure to pay off its mounting debts and subsequently seeking refuge at the SEC for a debt payment suspension in early 1999.
The committee will determine whether or not the audited financial statements of Piltel as of Dec. 31, 1998 and prior years are not misleading and whether or not the company has committed window dressing to its financial statements.
On Jan. 9, 1999, news reports came out that the PLDT subsidiary was having difficulties servicing its loans that have ballooned to over P30 billion, earning the ire of the SEC which accused the company of not immediately disclosing such material information.
"These liabilities were previously disclosed in its periodic reports, however, the magnitude of effects in its operation or its liquidity to meet these obligations were not fully discussed in said reports. Furthermore, defaults in the payment of interest and suspension of principal payments during the first week of January were not promptly disclosed by the company," the CFD said.
The SEC had earlier formed a probe body made up of specialists from the then Prosecution and Enforcement Division and the then Money Market Operations Department to look into the books and records of Piltel. But the audit findings were not fully verified due to the company’s failure to provide complete records and documents.
In 1998, Piltel said it chalked up losses of P4.1 billion, reflecting operating losses and provisioning. This was slightly trimmed down to a P3.9-billion-loss in 1999. Last year, estimates placed the firm’s losses at P5.2 billion as a result of the shift to an analog-based system to that of a global system for mobile communications (GSM) platform like its sister company Smart Communications.
Last year, Piltel secured a master restructuring agreement (MRA) with a number of its creditor-banks that will lead to the completion of the initial stage of its debt rehabilitation plan. The MRA features the conversion into capital stock of Piltel and PLDT – 50 percent of the bank debt will be replaced by peso-denominated Piltel convertible preferred shares exchangeable into PLDT convertible preferred shares; 25 percent of the bank debt will be replaced by a secured 10-year term loan; and the remaining 25 percent of bank debt replaced by secured 15-year amortizing term loan.