MANILA, March 15, Reuters – A 288 million dollar syndicated loan for the Philippines Long Distance Telephone Co marks a major initiative by Manila’s commercial bank creditors to recycle existing debt, bankers said. 

BOT International (HK) Ltd, Citicorp International Ltd and the Hong Kong and Shanghai Banking Corp are lead­ managing the loan. Syndication started on February 25 and may be completed by the end of next week, Citicorp officials told Reuters. 

They said the package will use the Philippine Central Bank’s dollar relending facility. 

The facility involves the redemption of Central Bank debt paper held by creditor banks and the re-lending of the redemption funds to the private sector. 

“The Central Bank has been firm in saying that it will be very, very selective in relending approvals,” one banker said. He said the PLDT package would dwarf the relending deals so far approved, which involved only a few million dollars, but it differed from the rest because no dollars would actually leave the country. A Central Bank official said the loan would also cater to creditor banks’ appetite for Central Bank debt paper whose supply has been cut sharply. 

Earlier this month the Central Bank decided to limit debt/equity swaps involving such paper to about 180 million dollars annually to curb inflationary trends, the official said. 

He said the loan will offer an attractive alternative to creditor banks who can otherwise shed Philippine debt paper only at discounts as deep as 50 pct on secondary markets. 

A Citicorp official said the loan would restructure PLDT maturities falling due between 1987 and 1990. She said in the normal course PLDT would have paid the peso equivalent of its amortizations as they fell due, to the Central Bank subsidiary Private Debt Restructuring and Repayment Corp (PDRRC). 

But the new 10-year loan, with a 39-month grace period, would stretch PLDT’s maturities until at least 1998. 

Set up in 1985 to manage the outflow of foreign exchange from the Philippines by converting private-sector external debt into Central Bank-assumed obligations, the PDRRC had until end-1987 assumed 512 million dollars of such debt from various private sector debtors, the Central Bank official said. 

The PLDT loan will carry interest at one percentage point over London Interbank Offered Rates (LIBOR) for three years, rising to 1-1/8 points over LIBOR for the remaining seven years. The firm currently pays two points over LIBOR. 

In contrast, Central Bank credit schedules or IOU’s, issued after a December 1987 debt restructuring took effect, carry lower interest of 7/8 points over LIBOR. 

Another Citicorp official said some of PLDT’s creditors wanted to exit from loans to the phone company. “Not all the 50-odd banks want to join this loan,” he said. “But new banks who already hold Central Bank debt paper are willing to relend recycled funds to PLDT.” 

He said PLDT was a safer bet for the banks because it was hedged against sharp fluctuations in the peso-dollar exchange rate. 

PLDT earns some dollar revenues and has built an automatic adjustment into its billing so that exchange-rate fluctuations are passed on to subscribers, the official said. 

“There are only a handful of potential candidates like the PLDT for this kind of refinancing package,” he said. 

PLDT is the largest of 58 firms providing telephone services in the Philippines and operates 94 pct of all telephones in the country. It is listed on the Manila and New York stock exchanges. 

The firm’s annual report shows it had long-term foreign debt totalling 556.2 million dollars at end-December 1986. 

A PLDT official said the refinancing package is one of the new sources of funds being tapped by the PLDT for a 7.3 billion peso expansion program. 

In January, the firm signed an agreement with World Bank affiliate International Finance Corp for a 24 million dollar loan. It has said it will issue one billion pesos worth of bonds. 

The company official said plans are also being finalised to float two billion pesos worth of debentures. 

(c) 1988 Reuters Limited