Banks can absorb losses from ABS-CBN shutdown

The Philippine banking system can absorb potential credit losses arising from the shutdown of broadcasting giant ABS-CBN Corp., whose congressional franchise renewal bid was recently crushed by lawmakers allied with President Duterte.

This was according to the Bankers Association of the Philippines, which expressed confidence in the capacity of banks to manage their credit portfolio in relation to the nonrenewal of the ABS-CBN broadcast franchise.

From this year to 2027, ABS-CBN has more than P21 billion worth of interest-bearing loans due for repayment at the parent company level, based on its regulatory filing as of end-September 2019. Including subsidiaries, consolidated long-term debt amounted to P26.5 billion. This debt accounted for about 2.5 percent of some P8.4 trillion in the total net lending of local universal and commercial banks.

“The banking industry remains strongly capitalized and in a solid liquidity position to manage credit risks,” the BAP said.

“In the midst of today’s pandemic and concerns on the nonrenewal of the ABS-CBN broadcast franchise, we strongly believe that banks will continue to be steadfast as they are supported by strong financial conditions, robust risk management systems and a good corporate governance,” the association said.

In the case of ABS-CBN, which employs about 11,000 direct and indirect workers, opposition from most members of the congressional committee that approves franchises, rather than the pandemic itself, cast doubts on its viability.

The biggest creditors of the parent firm to date are Bank of the Philippine Islands and Union Bank of the Philippines.

In 2016, ABS-CBN entered into a 10-year loan agreement with UnionBank for a principal amount of P4.75 billion at an interest rate of 5 percent a year. In the same year, it availed itself of a P3.2-billion, 10-year loan from Bank of the Philippine Islands (BPI) likewise at an interest rate of 5 percent a year, proceeds from which refinanced old loans.

In 2017, ABS-CBN entered into another loan with UnionBank worth P1.6 billion for a term of 10 years at 4.25 percent a year for the first year and 5.15 percent for the succeeding years until maturity.

The company obtained a P1-billion, 10-year loan from Philippine American Life and General Insurance Co. in 2014 to partially finance its capital expenditure requirements and general working capital requirements. It carried a fixed rate of 5.4 percent a year.

In 2018, BPI extended another P6-billion, seven-year loan to ABS-CBN to refinance maturing debt and general working capital requirements. The loan carried an interest of 5.75 percent a year.

In 2019, ABS-CBN entered into a 10-year loan with UnionBank for a principal amount of P5 billion to partially finance its capital expenditures and general working capital requirements. The loan carried a fixed rate of 6.74 percent a year.

On the other hand, the P6 billion worth of bonds issued in 2014 carried a tenor of seven years and a fixed interest rate of 5.335 percent a year.

Separately, Sky Cable has P5.6 billion worth of outstanding debt, including those owed to BPI (P873 million), Security Bank (P873 million), BDO Unibank (P2.76 billion) and RCBC (P1 billion).INQ