Capwire seeks more time to settle P730-M loans; 3rd party adviser eyed

Capwire Telecommunications is asking its creditors to give it more time to pay the interest and principal on about P730 million in loans, following external events that adversely affected the company’s profitability.

Capwire senior vice president and chief finance officer Joel Aguilar told The STAR that they are preparing a new business and financial restructuring plan that will reflect the change in assumptions brought about by the Sept. 11 tragedy in the US and the access charge problem with the US last year.

Aguilar said they have discussed on the matter of redoing the assumptions with their creditors who are reportedly are willing to listen to a third party adviser.

The creditors nominated Financial and Strategic Restructuring Advisory Inc. (FSRA) which has just submitted its recommendations for a new financial restructuring plan for Capwire. "The matter is now being evaluated by the creditors," Aguilar said.

Three years ago, Capwire prepared a business and financial restructuring plan calling for a two-year grace period on payment of interests and a three-year grace on the principal. "We were supposed to start paying interest last year and principal next year. However, after the events of 9-11 and problems on the access charge with the US, we said we cannot meet interest payments and have to restructure principal payments again," Aguilar said.

The access charge problem with the US was brought about by an increase in the termination rates charged by major Filipino carriers from eights cents to 12 cents a minute for landline calls and from 12 cents to 16 cents for cellular calls terminating in the Philippines.

Capwire officials explained that the same rate is being charged by the major carriers on the former, making it unprofitable for Capwire to accept international calls. "The increase has changed our revenue assumptions," the officials pointed out.

It will be recalled that the US Federal Communications Commission (FCC) en banc just recently upheld the findings of its international bureau which last year found the Philippine Long Distance Telephone Co. (PLDT), Smart Communications, Globe Telecom, Bayan Telecommunications (Bayantel), Digital Telecommunications Phils. Inc. (Digitel), and PLDT-subsidiary Subic Telecom guilty of ‘whipsawing’ when they unilaterally raised their termination rates to the detriment of American consumers.

Whipsawing occurs when foreign carriers like those in the Philippines engage in activities that will force US carriers to unduly compete with each other in the middle of negotiations in order to ensure better terms for the foreign telco. US carriers AT&T and Worldcom claimed that these Filipino carriers closed their circuits to force the American telcos to agree to the increased rates.

Prior to the submission of the business plan three years back, Capwire was able to get court approval for the suspension of payment of outstanding principal until such time that a business plan has been submitted. "That suspension has not been lifted since technically, we don’t have a plan approved by the creditors yet," Aguilar added.

A management review committee has also been created composed of five representatives from the creditor-banks and five from Capwire that will analyze the recommendations of the third-party adviser and decide how the company will move forward.