Sky, Home Cable sign P2.5-B restructuring deal with creditors

Creditors of Lopez-owned Sky Cable and PLDT’s Home Cable signed yesterday a debt restructuring agreement giving the cable operators seven years to pay for total debts of P2.5 billion.

The agreement came following the infusion by ABS-CBN Broadcasting Corp., sister company of Sky Vision and Central CATV, of $30 million into Beyond Cable, the holding company of Sky and Home. The new money will be in the form of a loan to Beyond, convertible into equity. Proceeds will be used to settle interest payments and to acquire new cable TV equipment.

Officials of Sky and Home told The STAR that the signing of the debt accord will pave the way for the merger at the shareholders’ level of Sky and Home as well as the acquisition by Sky of Home’s assets via a share swap.

They added that the debt restructuring agreement will give the country’s two biggest cable TV companies a much-needed reprieve from debt payments and hopefully help them get back into the black soon.

The following creditors signed the agreement: Asia United Bank, Asia United Bank-Trust, Chinatrust (Phils.) Commercial Bank Corp., Development Bank of the Philippines, Bank of the Philippine Islands, East West Banking Corp., International Commercial Bank of China, Keppel Bank Philippines, Inc., Metropolitan Bank and Trust Co., Bangkok Bank, China Banking Corp., Equitable PCI Bank, Amalgamated Investment Bancorporation and PCI Capital Corp.

Signing for the cable operators are Sky Cable owners Sky Vision Corp. and Central CATV represented by Eugenio Lopez III and Juan Miguel Sevilla and PLDT-affiliate Phils. Home Cable Holdings Inc. president Ray Espinosa. Debt restructured amounted to P1.166 billion for Lopez-owned SkyCable and P1.35 billion for Home Cable.

A source privy to the signing said the agreement calls for the payment over a seven-year period of the principal amount of the debt with interest payments current beginning next month.

Juno Chuidian, Skycable vice president for programming, said the successful debt restructuring paves the way for the continuous improvement of its services. "Our customers can expect us to offer more and better programming choices and to upgrade our distribution network," she said.

SkyCable and Home Cable are expected to deploy set-top boxes beginning this year to offer tiered programming and give cable subscribers flexibility in choosing the channels they wish to receive.The set-top boxes will also allow them to counter signal theft and piracy.

ABS-CBN earlier signed with four banks for a $120 million loan to refinance existing debt and expand its cable TV business. It signed the loan deal with ABN Amro Bank NV, BPI Capital Corp, ING Bank NV, and Societe Generale Asia Limited.

About $90 million will be used to refinance existing loans of ABS-CBN amounting to about $87 million while the remaining $30 million was given to Beyond.

The $30 million represents the capital needed by Sky Vision (Lopez company that owns Sky Cable) in the next two years, of which $5 million will be used to update loan payments and $25 million for the acquisition of set-top boxes.

In addition to the debt restructuring talks, officials of 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 include shareholdings in several smaller companies and the transfer of all its assets to Sky will result in the former becoming 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 be subject to the necessary government regulary body approvals, including that by the National Telecommunications Commission (NTC).

Right now, Sky Cable 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.