Without the emergency payment, ABS-CBN could have defaulted on the combined P21.5 billion loans owed to BPI (P11.4 billion) and UBP (P10.1 billion) because its loan covenant required it to possess a valid government license/franchise to operate its business.
ABS-CBN prepaid roughly 20 percent of its loans to BPI (P1.8 billion) and UBP (P2.2 billion) on 30 July 2020, 10 days after Congress denied the media giant’s franchise renewal.
The pre-payment was the first step in ABS-CBN’s bid to sign an omnibus security and intercreditor agreement to avoid defaulting on a loan while it scrambles to find alternative revenues after losing its cash cow.
As part of the debt restructuring deal finalized in May 2021, ABS-CBN agreed to mortgage P7.254 billion of its assets and allocate funds for a debt service reserve account.
In return, ABS-CBN’s creditors agreed not to enforce the franchise expiration default clause. They waived financial ratios and retained the original principal payment schedule based on the original loan agreements.
This means ABS-CBN does not have to worry about paying its principal payments until 2025.
But ABS-CBN is still not out of the woods.
It said that it would continue to negotiate for “waivers of certain covenants as the need arises” although its management expressed confidence it would be able to meet all of its creditors’ demands for the whole of 2021.