Globe, Bayantel forge debt-to-equity deal

Globe Telecom has moved to convert up to 69 percent of the Bayan Telecommunications Inc. (Bayantel) debt it holds into shares in the company to help the ailing telco get over its financial woes.

The transaction, once completed, is part of Globe’s plan to take over Lopez-led Bayantel, which is currently under corporate rehabilitation.

This also follows Globe’s recent announcement of a network sharing deal that allows Lopez-owned ABS-CBN Corp. to venture into the phone business.

In a disclosure Thursday, Globe and Bayantel said they had filed a joint motion before the latter’s rehabilitation court for the debt restructuring.

“The joint motion is intended to achieve a successful rehabilitation of Bayantel at the earliest possible date,” the two companies told the local bourse.

“Such a restructuring would allow Globe to further strengthen collaborative efforts with Bayantel in respect to their local exchange networks, corporate data and broadband businesses,” Globe said.

“Ensuring that Bayantel remains a going concern would allow both companies to become more competitive in the current industry environment,” it added.

Meanwhile, for Bayantel, a restructuring of its debt and the entry of Globe as a shareholder as well as a creditor will enable Bayantel to unlock and maximize potential of its key business assets and capabilities, and help accelerate its rehabilitation, the disclosure said.

Bayantel’s current principal obligations total at $423.3 million. Globe bought 96.5 percent of these IOUs from Bayantel’s former creditors late last year.

Globe said Bayantel’s operations had not generated sufficient revenue to continue making the debt payments under its existing rehabilitation plan.

“This has been attributed to a decline in revenue from traditional fixed line services offered by Bayantel, increasing competitive pressures in the telecommunications industry and Bayantel’s inability to make any considerable capital investments while under its high debt burden,” it added.

Under the restructuring program, up to 69 percent of Bayan’s debt would be converted into shares in the company, which will be held by Globe.

Bayantel’s outstanding principal debt balance would be reduced to approximately $131.3 million.

“The restructuring, including the debt to equity conversion feature, would apply to all of Bayantel’s creditors equally upon receipt of certain regulatory approvals, including the confirmation of the court,” Globe said.