Sky, Home to ink restructuring deal for P2.5-B debt

Sky Cable and Home Cable are expected to sign next month an agreement with their creditors for the restructuring of about P2.5 billion in combined debts as soon as ABS-CBN Broadcasting Corp. pumps in $30 million in fresh capital - a condition precedent to the debt restructuring agreement, The STAR learned.

Manuel Pangilinan, chairman of Home Cable’s parent firm Philippine Long Distance Telephone Co. (PLDT), told The STAR that everything seems to be in order with the ABN-Amro-led group that would extend the loan to ABS-CBN. The broadcast firm will, in turn, relend to its sister firm Sky Cable. ABS-CBN and Sky Cable are both owned by the Lopez group.

ABS-CBN is in the process of finalizing its $120-million loan from a group of four foreign banks, including ABN- Amro. This will be used to refinance its $87-million loan, which will mature in the next two years, while the remaining $30 million will be used for its investment in cable unit Beyond Cable, said Sky Cable president and ABS-CBN chairman and CEO Eugenio Lopez III.

"ABN-Amro is committed to refinance the loans and so that amount of money would be spread out in a comfortable time frame," Lopez pointed out.

The board of directors of both Sky and Home met on Wednesday during which Sky officials updated the Home directors, led by Pangilinan and Home Cable president Ray Espinosa, on the status of the debt restructuring talks and the arrival of funds from ABN-Amro.

In addition to the debt restructuring talks, representatives from both Sky and Home are currently finalizing the transfer of Home’s assets to Sky. Sources told The STAR that Sky will be paying Home in terms of shares in Sky although both companies have yet to arrive at a consensus on the valuation of the assets and the shares. Home’s assets includes shareholdings in several smaller companies and the transfer of all its assets to Sky will leave the former a shell company.

As envisioned, both the Lopez and PLDT groups will have shares in Sky Cable (66.67 and 33.33 percent, respectively) which will, in turn, own Home. The two groups’ shares in Sky, on the one hand, will be held by Beyond Cable (the holding firm for Sky and Home). The new ownership/equity structure will, however, be implemented only after the signing of the debt restructuring agreement and the transfer of assets from Home to Sky.

The consolidation of the country’s two largest cable television companies, which account for 70 to 80 percent of the market, will however be subject to the necessary government regulatory body approvals, including that by the National Telecommunications Commission (NTC).

Pangilinan said that the release by ABS-CBN of $30 million, which will be in the form of a loan to Beyond Cable, was a condition precedent to the signing by the creditors of the debt restructuring agreement.

Part of the amount will be used to update interest payments to the creditor-banks while a portion will be invested into the cable business.

Sky Cable currently owns 66.67 percent of Beyond while Home accounts for the latter. The $30 million loan by ABS-CBN is convertible into equity and the PLDT group has two years within which to payback the Lopez group $10 million or the loan will be converted into equity.

"This means that if the PLDT group fails to give $10 million within two years, its shareholdings in Beyond will be diluted from the current 33.33 percent to only 10 percent with the Lopez group holding 90 percent," a STAR source said.

Pangilinan, however, said they have no plans of infusing additional funds into their cable business nor buy back Home’s assets after the transfer to Sky.

However, the same source said the Lopez group is still pushing through with its plans to sell part of its stake in Beyond to a third party.