ABS-CBN borrows another P1B for capital spending

ABS-CBN Corp., the media holding company of the Lopez Group, raised an additional P1 billion in long-term debt Tuesday to partly fund its capital spending plan.

A filing in the Philippine Stock Exchange showed that ABS-CBN obtained the loan from Philippine American Life and General Insurance Co., or Philamlife. The loan has a 10-year term with a fixed interest rate of 5.4 percent per year, ABS-CBN said.

The loan comes on top of the P6 billion that the company raised from the sale of seven-year bonds at 5.335 percent a year in January.

ABS-CBN earlier obtained regulatory approval to raise as much as P10 billion but it has yet to finalize the decision on when the amount would be fully raised, chief financial officer Aldrin Cerrado said earlier.

ABS-CBN said the proceeds would be used mainly for capital spending amounting over five years.

The company  said it would spend for forward planning for its production process, which covered the construction of sound stages that would deliver improvements to operations by increasing production quality and reducing costs associated with on-location shoots.

The company will also use part of the funds to support its stock price, specifically through a share buyback program involving up to P500 million worth of shares which was announced earlier.

Companies typically buy back their shares to signal to investors that their management believe their stocks  are priced at a bargain.

The plan comes weeks after ABS-CBN said full-year profit in 2014 would likely be flat or slower than the previous year.

Cerrado said net income this year was estimated at between P1.8 billion and P2 billion. The company was likely to hit its P2 billion profit guidance for 2013, about a quarter of which came from political ads.