Meralco gets reprieve from creditors

The short-term creditors of Manila Electric Co. (Meralco) agreed yesterday to extend until March the deadline for the payment of the company’s $88 million maturing obligations, a company official said.

In a disclosure to the Philippine Stock Exchange (PSE), Meralco treasurer Rafael Andrada said the company’s short-term lenders have agreed to rollover the loan on the same terms and conditions.

"The company continues to review its options regarding a longer-term solution to its near-term obligations and will make the appropriate disclosures once these options are to be implemented", Andrada said.

The Meralco official said the lenders’ decision only indicate their continuing support to keep the viability of the power utility through its refinancing schemes.

Early this week, Standard and Poor’s (S&P), an international credit rating agency, warned that Meralco could face a ratings downgrade if it fails to restructure its maturing short-term debts.

The rating agency also pointed out that Meralco would likely be facing severe difficulties in making this payment given its very strained liquidity.

"In the absence of a rollover, Meralco’s failure to repay its short-term debt is likely to cause lowering of its rating to selective default (SD)," S&P said.

Meralco’s short-term creditors had earlier given the company a six-month reprieve in the middle of 2003 allowing it to extend the payment early this year.

The lenders move to grant another extension may be partly due to their continued optimism that the company would recover from its financial debacle despite major setbacks, Andrada said.

Meralco’s short-term creditors include the Bank of the Philippine Islands, Citibank NA, Equitable PCI Bank and Banco de Oro Universal Bank.

Though it was able to record a net profit of P74 million in the third quarter of 2003 or 103.6 percent higher than the previous year’s P282 million, Meralco faced another dilemma when the Supreme Court ordered the suspension of a provisional authority to collect from its customers an additional 12-centavo rate hike starting this month. The rate increase should have allowed Meralco to earn at least P1.8 billion a year to fund its capital expenditures.