"As part of the engagement, CSFB will provide a coordinating role in the company’s ongoing initiatives to review its indebtedness and to address means to strengthen the capital structure of Benpres and its subsidiaries," Benpres chief finance officer Angel Ong said.
Ong signed the deal in behalf of the Lopez-owned holding firm while Eric Vavel, managing director of CSFB Singapore Ltd., represented the financial adviser.
CSFB, in particular, will play a major role in Benpres’ plan to sell roughly $240-million worth of equity in three "good performing" subsidiaries – ABS-CBN Broadcasting Corp., First Generation Holdings Corp. and the merged SkyCable and Home Cable unit – to raise cash for the group’s debt reduction program.
Benpres is struggling under the weight of P10.5-billion debt load, incurred mainly by subsidiaries Bayan Telecommunications Holdings Corp. (BayanTel) and Maynilad Water Services Inc. (MWSI).
Benpres itself does not have any significant loan exposure but it still needs to raise additional cash for infusion into these losing subsidiaries.
Although Benpres will be able to service P1-billion worth of long-term commercial papers (LTCP) maturing in September 2001, the company also has to prepare for the redemption of $150-million worth of notes listed at the Luxembourg Stock Exchange set to expire in Dec. 2002.
Based on estimates, Benpres can raise $125 million from the sale of 25 percent of First Gen, a wholly-owned subsidiary of First Philippine Holdings Corp. which, in turn, is 47-percent owned by Benpres.
Another $66 million can be raised with the sale of a third of the $200-million estimated value of the SkyCable-Home Cable (a PLDT company) while some $40 million-$50 million more could come from the disposal of an eight-percent stake in ABS-CBN, which would reduce Benpres’ shareholdings to a still-controlling 51 percent in the media giant.
In the first quarter of 2001, Benpres suffered a P360-million loss primarily as a result of its equitized share in the losses of BayanTel. Last year, the company struggled as its earnings went down 83 percent to P368 million mainly due to a sharp decline in the value of its investments in BayanTel and Maynilad.
In BayanTel alone, Benpres booked P1.6 billion in losses as the firm succumbed to the pressure of the stiff foreign exchange devaluation and the economic difficulties that translated into a lower subscriber base.
Another loose end is the operation of cellular firm Extelcom, where Benpres booked a gargantuan P6-billion loss in 1999. BayanTel owns 47 percent of Extelcom but the Lopez group does not have management control of the company.
Last January, BayanTel appointed Bank of America as financial adviser in its effort to restructure almost $500 million in loans incurred for network and service rollout.
MWSI was likewise hard hit by the peso devaluation, posting P2.7 billion in forex losses pushing the company’s debts to an equivalent of P40 billion, from only P20 billion at the time it won the bid for the West Zone Concession of the Metropolitan Waterworks and Sewerage System (MWSS) in 1997.