Sky, Home Cable creditors to sign P2.6-B debt pact

Creditors of Sky Cable and Home Cable have committed to sign middle of this month a debt restructuring agreement involving P2.6 billion in combined debts of the country’s two leading cable TV companies, The STAR learned.

The owners of Sky and Home are scheduled to infuse $30 million or about P1.7 billion in new money at the same time the loan restructuring agreement is being signed.

"The signing and the infusion of new money will probably be done simultaneously because both parties wanted to make sure that the other will perform its part of the deal," highly placed sources told The STAR.

The money was supposed to have been a precondition to the signing of the restructuring agreement but sources said the Lopez group, which sourced the bulk of the funds, wanted to be sure that the agreement will be signed so the infusion was put off to middle of this month.

Late last year, Sky and Home signed with their creditors a memorandum of agreement outlining the various commitments and conditions necessary for the restructuring of their debts.

As part of the MOA, Sky and Home committed to infuse $30 million in new money in 60 days.

Sky Cable is owned by the Lopez group through Sky Vision While Home Cable is owned by the Philippine Long Distance Telephone Co. (PLDT) through Mediaquest/Unilink. Sky Cable president Eugenio Lopez III and Unilink president Ray Espinosa signed for their respective companies

While the MOA does not specifically mention the source of the funds, sources said that $20 million or about P1.1 billion will be sourced by ABS-CBN Broadcasting Corp. for the Lopez group through borrowings.

The money, which will be in the form of loans convertible to equity will be used to update interest payments to the banks and for use in operations to improve the viability of the cable business, as well as to complete the business plan and effect the merger of the two companies into Beyond Cable.

Creditors of Sky and Home include UCPB, PCI Bank, BPI, MetroBank, Security Bank, Development Bank of the Philippines, among others. BPI, which did not sign the MOA, is expected not to agree in writing to a debt restructuring as part of a bank policy but has committed not to oppose it.

Part of the new money that will be put in will be used to invest in addressable set-up boxes that are expected to minimize, if not totally eliminate, cable TV piracy. The boxes will also allow the two CATV operators, which account for about 80 percent of the market, to go into tiering (consisting of different price packages) of their services to subscribers.

Cable TV piracy is being blamed largely for the mounting losses of Sky and Home over the years. Another reason being cited by the two are the high cost of foreign programs and the huge debt burden. Sky and Home decided to merge to improve operational efficiencies, reduce redundancies in the laying out of infrastructure, and to have better bargaining power over foreign program providers.

As to the payment of the principal obligation, the banks and the two cable TV operators have agreed under the MOA to work out an extension of payments over a period of time, taking into account the business plan prepared by Sky and Home.