PLDT upsizes loan to $145 million

In what marks as the final component of its comprehensive liability management exercise, PLDT has successfully closed a four-year multi-currency loan, upsizing it to $145 million from an original size of $130 million. The $145 million loan comprises commitments in yen and US dollars amounting to JPY10.91 billion and $53.3 million respectively.

Ironically one of the lead managers of the offering, ING Bank is also financial advisor to First Pacific and some wonder whether it feels its loyalties torn, given First Pacific's protacted difficulties trying to sell the company in the face of opposition from PLDT board members led by Manny Pangilinan.

Proceeds from the deal will go towards part payment of a JPY19 billion loan maturing in June 2003 and a $103 million loan due December 2003. According to figures provided by Dealogic, both the loans are of five-and-a-half years maturity and were tapped in December 1997 and June 1998 respectively at spreads over Libor of 90bp and 175bp respectively. PLDT's last visit to the syndicated loan markets was in August 2000, when it tapped a $140 million loan comprising of two seven-year and one five-year tranches. The seven-year tranches paid a margin of 205bp over Libor, while the five-year tranche paid 195bp over Libor.

The current deal pays a spread of 365bp over Libor for commitments in US dollars and 385bp over Libor for the JPY tranche. Although the pricing on the current deal is much more expensive than the past loan market borrowings, it is definitely cheaper than the 570bp and 578bp over Libor that PLDT paid in May this year when it raised $100 million and $250 million through the sale of five-year and seven-year bonds respectively.

With the latest loan deal, PLDT has raised $644 million in refinancing facilities including the $149 million term loan that it secured from Kreditanstalt fnr Wiederaufbau (KfW) in January. More importantly, and concurrent with its tender exchange in May, PLDT has now completed its liability management exercise addressing its debts maturing in the next two years. As of June 2002, PLDT's consolidated indebtedness stood at Ps178.2 billion, according to a research report by Barclays Capital. Annualised net debt-to-Ebitda ratio at 3.8 times for the first half of 2002 was down from 4.4 times at the end of the financial year in 2001. However, Ebitda-to-net interest coverage was up from 2.6 times in 2001 to 3.4 times for the first half of 2002.

The loan deal also marks the second high-profile corporate loan transaction in the foreign currency loan markets this year from the Philippines. In January, Ayala Corporation tapped a five-year $150 million loan paying a spread of 260bp over Libor. Some observers believe Ayala's loan deal was not very successful, given that only four banks participated in it, including the mandated arrangers.

PLDT's transaction, on the other hand, saw participation from 14 banks - only three from the Philippines - demonstrating the confidence of the foreign banks in the borrower. PLDT's performance in the first half of 2002 was healthy with net profits amounting to Ps2.76 billion, up 101% over the same period last year and 12% over the preceding quarter. This was mainly as a result of the performance of its cellular subsidiary, Smart Communications, which accounted for 85% of the profitability for PLDT in the first half of 2002. Smart is also in the market for a $100 million five-year loan.

BNP Paribas, Citi/SSB, ING Bank and Mizuho Corporate Bank were the joint lead managers for the $145 million deal for PLDT, which paid a participation fees of 200bp (all-in of 426bp in US$ terms and 446bp in JPY) on the top level. The final allocations of the deal marketed on three levels are as follows:

$145 million multi-currency term loan for PLDT