Makati Med, creditors remain deadlocked over P1.2-B debt

Makati Medical Center and its creditors have reached a stalemate on the proposed restructuring of the premiere medical institution’s P1.2-billion debts.

The STAR sources revealed that as a precondition to the debt restructuring, the bank creditors want fresh capital infusion amounting to P300 million, specifically from the the group of Manuel V. Pangilinan, MMC chairman and also the chairman of the country’s most profitable firms, Philippine Long Distance Telephone Co. (PLDT) and its wholly owned wireless subsidiary Smart Communications.

However, Pangilinan reportedly joined Makati Med as chairman, not as an investor, and that his intention was simply to professionalize the medical institution which includes having a new set of board of directors.

While Pangilinan is one of the possible sources of the P300 million, the sources said he has stressed that he is under no obligation to invest that amount into MMC, especially since owning and managing a hospital is not the kind of business PLDT and Smart are into. If ever Pangilinan will invest, STAR sources said other vehicles will be used, such as Metro Pacific Corp. which is also partly owned by Hong Kong-based First Pacific Co. where he is the CEO and managing director. First Pacific owns a controlling 25-percent stake in PLDT.

The STAR learned that Pangilinan considered making Smart an investor in MMC, but realized that it might create an uproar among Smart and PLDT creditors. But using Metro Pacific as a vehicle is still an option, sources said.

Pangilinan’s having joined as MMC as chairman, according to a source, has created false expectations on the part of MMC’s creditors that Pangilinan will bring in PLDT/Smart as an investor. "His entry into MMC, however, gave MMC better chances of raising funds from other sources because of his reputation in the business community," the source told The STAR.

MMC management is still in talks with other creditors for possible loans to raise the P300 million as well as to service part of its debts. Right now, the hospital is only paying interests on its P1.2-billion debt.

"We’re looking at borrowings and we’re also looking at equity. But we’re not clear yet on how much. It will depend on how the talks with the banks go," MMC president Gabby Mendoza has said.

He said the hospital needs to "bring up to date" some of its debts, in line with the restructuring talks.

Mendoza said the hospital is not looking to file for suspension of debt payments, nor is it contemplating on ceasing operations, as he expressed confidence that the hospital will get new money. "The only question is when," he said.

MMC has tapped the Development Bank of the Philippines to be its adviser in restructuring its loans. The bank has a P350-million exposure in the hospital. Other creditors include Rizal Commercial Banking Corp., Insular Savings, the Social Security System and DEG of Germany.

Makati Med is facing financial difficulties after it discovered that it had been incurring losses for the past three years. The hospital only found out in December that it had incurred P300 million in losses over a three-year period starting 2003.