US$90m loan to help Philippine subsidiary repay convertible bonds
First Pacific shareholders have approved a US$90 million loan to the company's Philippine property subsidiary to help it pay convertible bond redemptions.
Metro Pacific, 80 per cent-held by First Pacific, has been unable to secure outside financing at a reasonable price to repay about US$88 million of bonds due this month.
The Philippine property investments of First Pacific, controlled by Indonesia's Salim family, have been battered in recent years by the regional financial crisis and political instability.
First Pacific said it did not know when Fort Bonifacio - its flagship urban redevelopment project in Manila - would be able to hold another round of plot sales to prop up the company's flagging property investments in the Philippines.
Finance director Michael Healy said that despite general optimism for at least economic stability in the Philippines following the ascension of the Arroyo administration, the Manila property market would continue to be slow in the foreseeable future.
'Land sales [at Fort Bonifacio] have been minimal over the last 12 to 18 months. It is difficult to say when the next plot sale at Fort Bonifacio will take place,' Mr Healy said.
'The Philippine property market is very tight and over the next 18 to 24 months the forecast for the market continues to be tight,' he added.
In late 1995, Metro Pacific acquired through subsidiaries Fort Bonifacio a 200-hectare former military base, hoping to turn it into Manila's prime financial and residential district.
But after selling five years' worth of lot inventory in 1996, sales have plummeted since the 1997 financial crisis.
Since then, the company has shifted its focus to building horizontal infrastructure and delivering sold plots.
The company also was forced to return a 64-hectare plot to the Philippine government last year, after repeated attempts by authorities to remove squatters failed.
The loan gives Metro Pacific some breathing space in securing outside long-term refinancing for its debts due for repayment this year. The company has until November to repay the loan - which carries a 15 per cent interest charge - to its parent company, with an option for it to be extended until December.
Mr Healy said Metro Pacific's difficulties with refinancing its borrowings did not bother him, as this had been a widespread difficulty for Asian corporations since the crisis.
'We have seen in Asia, over the last three years, that one of the issues has been refinancing of debts in the international capital markets. The markets for Asia are extremely tight,' Mr Healy said.
He said in Metro's case, 'it is not a question of interest cover, but of principal payments'.