Avoiding default: Lopezes pre-paid P4B of ABS-CBN's loans to BPI, UBP shortly after franchise killing; mortgages P7.25B assets in debt restructuring deal
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Avoiding default: Lopezes pre-paid P4B of ABS-CBN’s loans to BPI, UBP shortly after franchise killing; mortgages P7.25B assets in debt restructuring deal

The Lopezes prepaid P4 billion of ABS-CBN Broadcasting’s loans to Bank of the Philippine Islands of the Ayalas and Union Bank of the Philippines of the Aboitiz family barely three weeks after a congressional committee snuffed out the fallen media giant’s franchise application.

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.

READ: Kapamilya carnage: Lopezes lose P13.5B, lay off 4,552 staff in 2020 after ‘killing’ of ABS-CBN TV franchise

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.

READ: Aboitiz, Ayala banks have combined P21.5B loan exposure to Lopez in off-air ABS-CBN

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.

READ: Katigbak, top ABS-CBN execs get pay hike in 2021 amid ballooning losses, retrenchment, unpaid debt

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.

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