Biz Buzz: Funding the GMA 7 bid

The country’s two biggest lenders, Banco de Oro Unibank and Metropolitan Bank and Trust Co., are in talks with the group of businessman Manuel V. Pangilinan to fund the businessman’s bid to acquire a controlling stake in the Kapuso broadcasting network GMA 7.

Sources said that in anticipation of a buyout deal, the banking arm of “Tatang” Henry Sy Sr. could become the lead arranger of a P20-billion bridge financing facility for this purpose, with Metrobank joining the syndicate.

But this bridge financing facility is only the shortcut route to prepare the cash payment anytime that a deal is ready to be signed. Under the financing game plan, this bridge financing will eventually be replaced by a permanent financing, which isn’t a problem for the group given the plum credit rating of flagship telecom enterprise Philippine Long Distance Telephone Co. (investment grade rating—higher than the sovereign rating—from the three global credit watchdogs S&P, Moody’s and Fitch).

MVP had said that there was no plan to raise debt or equity “at the PLDT level” but whichever unit would do so was seen benefiting from the umbrella of PLDT’s strong credit metrics.

Being the likely main vehicle for the prospective acquisition, the balance sheet of Mediaquest Holdings will have to be expanded, whether through the injection of fresh capital by PLDT in the form of Philippine depositary receipts or sale of financial assets.

All told, the group is seen easily getting the funding needed to buy Kapuso. Banking sources estimated that the minimum amount that MVP needs to raise was about P45 billion, or about 86 percent of the P52.5-billion enterprise valuation for the whole of GMA 7.

This minimum amount is what MVP needs to buy out the shareholders—the triumvirate of Gozon, Duavit and Jimenez clans—while P52.5 billion is the maximum amount needed assuming that all minority shareholders will accept a tender offer. Those who expect that MVP can unlock good values at the helm of GMA 7—especially given the synergies with PLDT—are expected to hold on to their shares.—Doris C. Dumlao

Means, motive, opportunity

There might be more than meets the eye to the recent spate of attacks in the media against Philippine Amusement and Gaming Corp. chair Cristino Naguiat Jr., according to at least two Biz Buzz sources.
We were told the bulk of attacks against the controversial Pagcor chief was coming from the camp of a family/business group, which—if the talk is to be believed—tried, but failed, to get in on the action at the multibillion-dollar Pagcor Entertainment City that is now being built on the edge of Manila Bay.

In particular, this family/business group had several exploratory talks with one of the four licensees of the project (take your pick from Bloomberry of ports king Ricky Razon, the Belle group of the Sy family, Travellers Group of property tycoon Andrew Tan and the Okada group).
However, talks between this influential family/business group reportedly failed to prosper and some of its members were upset that Naguiat did not lift a finger to help them (or so the story goes)—hence the attacks against the Pagcor chief.

Expect more negative press in the coming days, this we were told.—Daxim L. Lucas

Philippines checks out Myanmar

The opportunities that have emerged following the opening up of the economy of Myanmar have proven to be too good for Philippine companies to resist. This week, a delegation of Philippine companies led by Splash Corp., a personal care products manufacturer that has diversified into fast-moving consumer goods, is scheduled to go to Myanmar to check out possible areas of cooperation and investments.

Philippine companies intend to gain a foothold in the country before the American and European companies get there.

Recently, Splash hosted a delegation from Myanmar led by Myanmar Foreign Minister U Wunna Maung Lwin, who also met with President Aquino and took part in the Philippines-Myanmar Joint Commission for Bilateral Cooperation.

Now, it’s the Philippine representatives’ turn to enter Myanmar and find a place in the corporate sector to plant the Philippine flag.—Tina Arceo-Dumlao

Redesigning the partnership

Mining tycoon Felipe Yap’s Lepanto Consolidated Mining Co. has taken a heavy beating as a result of the recently issued mining executive order (EO), which was broadly interpreted by the market in the last two weeks as a risk to Far Southeast Gold’s crucial quest to convert its four-year mineral production sharing agreement (MPSA) into a Financial or Technical Assistance Agreement (FTAA) license. The conversion of the MPSA into FTAA is a prerequisite to South African mining giant Gold Fields’ completion of its 60-percent takeover of the mining project in Mankayan, Benguet province.

Gold Fields, one of the world’s biggest unhedged producers of gold, earlier bought a 40-percent stake in Far Southeast from Liberty Express Assets, a privately held offshore holding firm. But Gold Fields has yet to exercise an option to buy another 20-percent block from Lepanto itself pending the acquisition of such FTAA.

Some fund managers say the Lepanto-Gold Fields partnership may still continue, albeit in a different form. Since Gold Fields already has one foot in the door with its 40-percent stake (but with the assumption that it will eventually get 60 percent), the question is whether it will be happy with just that 40-percent interest, in the worst case that the conversion into an FTAA is not realized. According to the grapevine, however, it may not be the end of the world for Far Southeast. Sources theorize that because Gold Fields is very upbeat on Far Southeast’s gold prospects, it may consent to have the formula redrawn. One option could be for Gold Fields to buy a significant minority stake at the Lepanto level to still end up with a 20-percent indirect equity in Far Southeast, thus adding to its 40-percent direct stake in the project.—Doris C. Dumlao

Battle of the travel expos

The Philippine Travel Agencies Association (PTAA)—the umbrella organization of local travel agencies—has distanced itself from last weekend’s “Travel Madness Expo,” which they pointed out sounded a little too much like their own annual “Travel Tour Expo.”

In an effort to ensure that the public does not confuse the two distinct events, the PTAA, headed by its president Aileen Clemente, issued a statement saying it was in no way connected to the event that was held at the SMX Convention Center.

“Due to several inquiries from its member-organizations and the public, the Philippine Travel Agencies Association would like to issue a clarification regarding an event called Travel Madness Expo, which is being held by a private corporation from July 20 to 22,” the PTAA said.

The PTAA has, of course, been holding its annual Travel Tour Expo events for the last 19 years, while last weekend’s Travel Madness Expo was the first such activity of what Clemente described as “a profit-oriented private organization.”

(PTAA’s own event, she said, has less of a profit motive since earnings are plowed back to the organization for the development of the travel and tourism industry.)

Clemente chose, however, not to describe the organizers of the Travel Madness Expo as a “breakaway faction,” even if Biz buzz heard that the proponents of the activity included one current member of the PTAA board as well as another former board member.

Should we expect more fireworks from this sector? Almost certainly.—Daxim L. Lucas

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