[Reuters]

Published date: 30th Oct 1987

30 October 1987

Reuters News

English

(c) 1987 Reuters Limited

MANILA, Oct 30 – The Philippine government and creditors of a private fertiliser firm have reached agreement on a 56.5 million dollar debt that has held up the country’s recent debt rescheduling agreement, bankers and officials said.

A senior foreign banker told Reuters that lawyers for both sides exchanged final draft documentation on Thursday.

As part of the compromise, the banker said, the creditors of Planters Products Inc, led by Barclays Plc, have agreed to a 15 pct forgiveness of principal, higher than the 12.5 pct included in an earlier agreement.

The earlier deal, which Involved government assumption of Planters’ debt, was rejected by a Senate Committee in a report last month.

The controversy erupted when President Corazon Aquino In a July speech to Congress accused Planters’

Creditors of using “none too subtle coercion” to force her to sign an executive order allocating government funds to redeem the firm’s debt.

The Senate panel said the executive order, signed only three days before the country’s debt accord was finalised, was unconstitutional. It said the order set a bad precedent of assumption of private-sector debt and called for its repeal.

The banker said the new compromise broadly followed the earlier one. Its complicated maze of swaps involved the purchase of Central Bank debt paper on the secondary markets for use in raising foreign exchange to redeem Planters’ promissory notes from the creditor banks.

The difference was that the government would pay Planters 397 million pesos in unsubscribed capital and Compound interest and permit the firm, on paper, to redeem its own debt, he said.

However, because of prevailing discounts on Philippine debt paper and the higher principal forgiveness, the banks had effectively written off about two-thirds of the debt, he added.

“Philippine debt paper is trading at a discount of between 42 and 45 pct on secondary markets,” the banker said. “This means that with the front-end principal forgiveness, Planters” creditors have agreed to take a hit of almost 60 pct on their loans to the company.”

The creditor banks were anxious to seal the compromise this week, he said, but delays on the Philippine side would force them into a race to sign the pact ahead of a November 15 deadline on the debt accord.

About 30 of the Philippines’ 483 creditor banks, including 19 of Planters’ creditors, have still to sign the debt accord.

The rescheduling documents, which restructured 13.2 billion dollars of foreign debt, must be signed by November 15 to take legal effect. The Philippines’ foreign debt totalled 28.95 billion dollars at end-April.

Manila would have to pay about 100 million dollars in additional interest this year if a clause in the debt accord back-dating lower interest spreads to January 1, 1987, does not take effect.

A senior Central Bank official said Budget Secretary Guillermo Carague had earlier this week signed a treasury warrant transferring 397 million pesos to Planters Products.

But the foreign banker said state-owned Philippine National Bank (PNB), which would handle all transactions on behalf of Planters, had not received the money yet.

The banker said the government, in an attempt to avoid dealing directly with Planters’ creditors, had worked through lawyers. The earlier compromise was directly negotiated by former Finance Secretary Jaime Ongpin.

Barclays, a member of the Philippines’ 12-bank advisory committee, has yet to sign the main debt accord. Manufacturers Hanover Trust Co, which chairs the panel, is the only major Planters’ creditor to have signed the accord so far.