First Gen to use P5.3-billion First Holdings infusion to trim debt

MANILA, Philippines - First Gen Corp., the power generation arm of the Lopezes, is planning to use the P5.3 billion infusion from its mother firm, First Philippine Holdings Corp. (FPHC), to trim down its debt.

“It (P5.3 billion) would be (used) for further debt reduction,” First Gen chief finance officer Giles Puno said.

First Gen late last week informed the Philippine Stock Exchange (PSE) that it has received some P5.3 billion from FPHC “as a deposit for future stock subscription.”

“The cash infusion from FPHC is in support of First Gen’s ongoing recapitalization efforts,” First Gen told the PSE.

First Gen has been trying to refinance and/or reduce its debt.

In May this year, First Gen worked out a P1.38 billion refinancing scheme for a loan secured to support its acquisition of Energy Development Corp. (EDC) through Red Vulcan Holdings Corp.

Puno said earlier that the refinancing scheme is one strategy that would attract investors in Red Vulcan.

“So what we’re doing is that we’re renegotiating it with BDO on an extended maturity. We hope to get a five-year facility and basically that will buy ourselves time, so that we can enter into the next phase of bringing in the investor,” he said.

“But when the investor comes, at least they will know that First Gen is not in a situation where it has immediate maturities that it will have to service,” he added

First Gen concluded its $544-million term loan in November last year for the purchase of Red Vulcan in Energy Development Corp. (EDC).

Marubeni Corp. had entered into an agreement with First Gen to “seriously consider” investing up to 40 percent in Red Vulcan of which proceeds of the sale will be used to partially finance the latter’s loans. In January 2008, First Gen acquired the 40-percent stake of Netherlands-based Spalmare Holding B.V. which paved the way for the company to own 100 percent of Red Vulcan.

Puno said they are entertaining a number of interested investors for Red Vulcan and hope to complete the sale within the year. He said they intend to keep a 24 percent stake in Red Vulcan.

First Gen was able to trim down its debt level to $362.9 million as of end-May, from $562.4 million in December 2007.

It was also able to pare down the staple financing at Red Vulcan from P29.2 billion to P13.86 billion.