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BIZ BUZZ: A debt repaid

/ 04:01 AM July 28, 2021

Last week, we told you about an offer Phoenix Petroleum made to its creditors offering to pay them attractive interest rates if they agreed to basically roll over their funds in the company’s maturing debt securities.

Under that scheme, some banks were worried that the petroleum firm was going straight to the creditors and undercutting the middlemen (the banks), some of whom could at least offer some protection to these bondholders in the form of financial advice, among others.

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Well, Biz Buzz learned that Phoenix did, in fact, settle its obligations with its creditors as scheduled last Monday by retiring P3.08 billion worth of maturing commercial paper.

“The settlement of the commercial paper is an overall reduction in our indebtedness, which improves our leverage and liquidity profile,” Phoenix Petroleum president Henry Albert Fadullon said in a statement, a copy of which was provided to Biz Buzz.

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“This puts us in a firmer footing and positions us well into the second half of the year. We are building on the progress of the past quarters as we prioritize our people’s safety, our customers’ needs, and preservation of resources,” he said.

The Phoenix chief added that the firm’s debt securities have “always been well-supported by both the retail and institutional investors, and the company is grateful for the confidence given, and having the opportunity to offer such instruments that benefit the investors, and support our growth.”

“Amidst persistent challenges, so far, this year, we generated record-high quarterly volume in the second quarter on the back of our fuels and LPG businesses,” he said. “With this improvement in sales, along with our sustained efforts to prudently manage our costs and capital, we have been able to shorten the cash cycle and gradually deleverage.”

The company pointed to the latest market share data of the Department of Energy showing that it grew its market share in the first quarter of 2021 to 7.8 percent from 7.5 percent as of the end of 2020 and remains the third largest petroleum player in the Philippines.

Fadullon said that despite challenges and setbacks, Phoenix remained determined and optimistic throughout this pandemic and their efforts had borne fruit.

“As quarantine restrictions become more relaxed and the country’s vaccination efforts continue, safety remains our top priority, but we are now more optimistic,” he said. “In fact, by all indications, our second quarter has yielded stellar results, which is encouraging us to look forward to an even more business-friendly environment.”

So how did Phoenix manage to pay off this debt? The company said the settlement of the commercial paper was “funded by a mix of internal funds and financing support from established institutional creditors.”

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Does “financing support” mean that the firm borrowed money to pay off loans? Likely. But, at least, it bought itself more precious time.

—Daxim L. Lucas

Legacies

It may be debatable, but in his mind, President Duterte considers it a crowning glory that he had brought some big businessmen to their knees.

Metro Manila’s two water concessionaires Manila Water Co. and Maynilad Water Services Inc. lost their old contracts even if they were binding, waived billions of pesos in arbitral award that took years of legal pursuit and were left with no choice but to accept new contracts just to end the battle against hostile regulators. Broadcasting firm ABS-CBN, on the other hand, lost its franchise and had to let go of many of its talents.

Because he deems such corporate crackdowns as legacies, President Duterte carved some time out of his ultimate State of the Nation Address (Sona) to again cite what he always believed to be onerous provisions in the water concession agreements alongside ABS-CBN’s alleged property tax circumvention.

Of course, a contract is a two-way street but in the case of the water utilities, it was always more convenient to blame the private sector concessionaires. After all, the Malacañang predecessors who signed the original contracts and the renewals are the President’s key allies.

To recall, the privatization of Metropolitan Waterworks and Sewerage System (MWSS)’s water supply, treatment and distribution was done during the term of President Fidel Ramos in 1995 (and hailed as a big success) while the extension of the deals with two concessionaires was approved in 2009-2010 during the term of former President Gloria Macapagal-Arroyo.

At the very least, however, the President did not mention by name any of the tycoons behind the much-maligned water concessionaires in his Sona. Although everyone knows who the business groups behind these concessionaires are, it sends a different kind of chill and a much bigger impact on the masses, if the President were to name names.

We heard that he had been advised not to name names this time around. Because the water utility issue had been resolved and new contracts signed, there’s really no point in rubbing salt into the old wound, especially as these business tycoons had contributed a lot to the country’s ongoing battle against the coronavirus pandemic. Not at the twilight of President Duterte’s term.

Meanwhile, if we’re talking about noncontentious legacies, Mr. Duterte has enabled a number of important pieces of legislation that the business community is very grateful for. These include the Ease of Doing Business Act, Tax Reform for Acceleration and Inclusion, Corporate Recovery and Tax Incentives for Enterprises Act and the Rice Tariffication Act, said Financial Executives Institute of the Philippines president Francis Lim.

“We look forward to the enactment of more probusiness legislation, such as the amendments to the Foreign Investments Act, Public Service Act and Retail Trade Liberalization Act during his remaining term,” Lim said.

“Collectively, these pieces of legislation are structural and game-changing that will jumpstart job creation for our people and do good for the country in the long term. These will be excellent legacies of President Duterte for which he will be kindly remembered by our people.”

Lim, a former president of the Philippine Stock Exchange, also thanked the president for acknowledging the help of the private sector in addressing the COVID-19 pandemic.

“We fervently hope that the President will make use of his remaining days in office to prove that rule of law prevails in the country as this is equally important in attracting more investments in the country.”

—Doris Dumlao-Abadilla INQ
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