PLDT buyout of GMA Network dims

Due to its current financial difficulties, telecommunications giant Philippine Long Distance Telephone Co. (PLDT) wants to trim the extent of ownership it wants to acquire in GMA Network Inc. from 51 percent to only 20 percent, a decision that might totally scuttle the deal.

Because of this development, the present owners of GMA Network, the country’s second largest broadcasting company, may no longer be interested in selling, highly placed sources said.

The sources revealed that while PLDT still wants a majority stake in GMA, it may take some time before it acquires the remaining 31 percent. "PLDT wants to buy the 20 percent now and then have the option of buying the remaining 31 percent later but the GMA owners, in particular Felipe Gozon, said it is either they’re in or they’re out," the sources said.

Under the original memorandum of understanding that was signed between the two parties, PLDT, through wholly owned subsidiary Mediaquest, was supposed to purchase a 66.67 percent stake in GMA at an equity value of P8 billion. Mediaquest is a 100-percent owned subsidiary of PLDT’s retirement fund.

According to the MOU, GMA has an enterprise value of P14.5 billion representing 100 percent of the company per its balance sheet and income statements. The broadcast company, Mediaquest president Antonio Samson revealed, has debts amounting to around P2 billion which when deducted from the enterprise value will reveal an equity value of P12.5 billion (100 percent of the stocks).

PLDT had earlier abandoned plans to float 10-year fixed rate notes due in 2011 in order to raise $250 million to refinance a mix of short and medium-term bank debts and bonds maturing between 2002 and 2004 following the terrorist attacks in the United States.

The company during the first half of the year reported an unconsolidated totaled debt to EBITDA (earnings before interests, taxes, depreciation, and amortization) of 5.47 to 1, nearly breaching the limits stipulated in debt covenant with its creditors of 5.5 to 1.

PLDT president Manuel Pangilinan said the company is considering other options in order to raise the amount needed, such as private placements. It was also learned that the company undertook cost-cutting measures and its considering selling some assets.

PLDT has already announced that it is selling 20 percent of its stake in subsidiary Smart Communications Inc., as part of ifs fund-raising activities.

The reported infighting among the existing owners of GMA Network, namely the groups of Felipe Gozon, Gilberto Duavit, and Menardo Jimenez, is also delaying the sale.