Globe to sell PHP7bn in retail bonds; plans Bayan merger

20 Jun 2013

Filipino communications service provider Globe Telecom plans to sell up to PHP7 billion (USD162.6 million) worth of retail bonds in July 2013, the proceeds of which will be used to fund its network modernisation programme, and its ongoing investment in struggling fellow operator Bayantel Telecommunications Inc (Bayan). Globe CFO Albert de Larrazabal says that the company has also been given the go ahead to sell a further PHP5 billion retail bonds (of the PHP15 billion sanctioned by its board). Around PHP10 billion of the bonds are currently trading on the local Philippine Dealing and Exchange Corp (PDEx) bourse.

The Manila Business Standard says that Globe intends to absorb Bayan into its own operation post-rehabilitation. The necessary court approval of the latter’s rehab plan is due within the next few weeks, he said, adding that ‘if 70% of the debt [is] converted into equity , depending on how the plan is approved, [Globe] will have slightly in excess of 50% [of Bayan’s shares].’ Ultimately, Globe hopes to buy 100% of the ailing carrier.

As reported by TeleGeography’s GlobalComms Database, last month Globe Telecom and Bayan submitted plans to restructure USD423.3 million worth of Bayan’s debts to ensure it does not default on its payment obligations. Ayala-backed Globe said: ‘Globe currently holds approximately 96.5% of the total financial indebtedness of Bayan. The joint motion is intended to achieve a successful rehabilitation of Bayan at the earliest possible date.’ Under the restructuring plan, Bayan’s outstanding (principal) debts would be trimmed to USD131.3 million, through a debt-to-equity transaction with Bayan-backer the Lopez Holdings Corp, while Globe would also convert up to 69% of the current outstanding debt into Bayan shares. According to Lopez Holdings spokesman Enrique Quiason, ‘Bayan’s operations have not generated sufficient revenue to continue making the debt payments under its existing rehabilitation plan’. The official went on to say that increased market competition and a decline in traditional fixed line services have impacted on Bayan’s ability to make considerable capital investments while under its high debt burden. The restructuring plan is designed to strengthen collaboration between Globe and Bayan – in terms of local exchange networks, corporate data and their respective broadband businesses.

Philippines, Globe Telecom (incl. Innove)