ABS-CBN seeks restructuring of P4.2-B debts

ABS-CBN Broadcasting Corp. is in talks with its creditors for a possible restructuring of some P4.2 billion in debts, to allow the company to free up funds to finance its capital expenditure program.

This as the company expects a complete turnaround this year from last year’s dismal performance. In 2005, net income was down 62 percent to P288 million while gross revenues went up only eight percent year-on-year.

Company officials said they expect a high double-digit growth in net income this year compared to last year largely because 2006 is a "recovery year" but also partly due to improved ratings, cost-containment programs which included a manpower reduction scheme, among others.

Analysts forecast ABS-CBN’s 2006 net income to reach P968 million, a 236 percent growth from last year.

From January to September 2006, the company posted an income of P694 million, up 70 percent from last year’s P409 million. Gross revenues increased two percent year-on-year to P12.95 billion, driven by stable airtime revenues and license fees from Direct TV. Net profit during the third quarter, however, dropped eight percent to P178.96 million from P194.6 million in the same period last year due to a slowdown in the industry’s advertising expenditure.

ABS-CBN, a Lopez-controlled publicly-listed entity, needs about P1.5 billion to finance its capital expenditures next year, a 50 percent increase from its 2005 requirement. About P800 million to P1 billion will be spent for the company’s initial foray into digital television technology, the first broadcasting company in the country to shift from analog to digital. The entire shift to digital, resorted to as a means to put a permanent solution to signal problems, is expected to cost several billions of pesos if done nationwide.

ABS-CBN vice-president and chief financial officer Miguel Jose Navarrete said they are proposing that the repayment period for the P4.2 billion in debts be stretched by three more years, or to five years.

Depending on the rates and terms that will be agreed upon, the company estimates that about a billion pesos will be freed up from the restructuring. The balance of next year’s capex requirement will be sourced from internally-generated funds.

Navarrete revealed that a number of financial institutions have approached ABS-CBN, offering to purchase the loans from the existing creditors, but the latter have decided to finance the restructuring themselves.