PLDT, AIG to sign deal on Smart sale

Telecommunications giant Philippine Long Distance Telephone Co. (PLDT) is set to sign anytime now an agreement with the American International Group Inc. (AIG) for the sale of a five- to 10-percent equity in wireless subsidiary, Smart Communications, Inc.

STAR sources revealed yesterday that PLDT and AIG are just ironing out some minor details as far as the deal is concerned. "But it is almost a done deal," a source said. It was learned that a special meeting was held yesterday to finalize the agreement.

PLDT will use the proceeds from the sale of part of its stake in Smart to settle some of its loan obligations that are falling due between now and 2004. It has total debts amounting to $2.8 billion, more than 95 percent of which is denominated in foreign currency. It is now faced with some $1.3 billion in debt maturing between 2002 and 2004.

In order to meet its maturing obligations, the company is pursuing refinancing opportunities with its traditional lenders, replacement credits, as well as other windows which it can access in terms of new credit.

The AIG conglomerate, chaired by M.R. Greenberg, has been aggressively investing in Asia, particularly in telecommunications companies in Indonesia and Thailand.

It is a leading US-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the US. Its global businesses include financial services and asset management, including aircraft leasing, financial products, trading, consumer finance, investment fund asset management, real estate investment management, and retirement savings products.

In 2001, AIG posted a net income of $5.36 billion, as against $6.64 billion the previous year, due to the impact of Enron surety losses as well as the Northridge earthquake claims that reduced core income by three cents per share. Core income last year was placed at $7.66 billion compared to $6.78 billion in 2000.

It was learned that PLDT has chosen AIG over several other potential investors mainly because the company was not interested in interfering with Smart’s business. "All PLDT wanted was the money, not somebody who would dictate how it should run the business," sources said.

PLDT earlier secured a loan from KfW of Germany and is now in talks with the Japan Bank for International Cooperation (JBIC) for another credit facility.