Banks left hanging with P27B loans to ABS-CBN
There is good reason other than press freedom that the Makati Business Club has expressed concern about the government order stopping ABS-CBN from broadcasting.
The Lopez network owes around P27 billion to banks controlled by the leading members of the Makati club.
That level of indebtedness, P27 billion, is the inflated version of what John Maynard Keynes had said: “When you owe your bank manager £1,000 you are at his mercy. But if you owe him £1,000,000 he is at your mercy.” According to regulatory disclosures, the biggest creditors now at the Keynesian mercy of ABS-CBN include:
• Bank of the Philippine Islands, which lent ABS-CBN P6 billion in 2018 to refinance an earlier P3.2 billion loan and also to fund the working capital requirements of the country’s largest network.
The seven-year loan bears a 5.75 percent interest, payable quarterly.
The P6 billion loan is on top of another P873 million also lent by the Zobel bank to Sky Cable.
• UnionBank, P5 billion, 10-year-loan extended only in May, with a fixed rate of 6.74 percent. The 2019 facility came after the Aboitiz-controlled bank lent the broadcast network P1.6 billion in 2017, following another loan of P4.75 billion in 2016.
• BDO, P2.76 billion, extended to Sky Cable to refinance loan obligations and to fund capital expenditures. This loan is classified as unsubordinated, meaning the obligation must be repaid before any other form of debt.
• RCBC, P1 billion, also to Sky Cable.
• Philam Life, P1 billion, a facility maturing in 2024.
• Security Bank, P873 million, also maturing in 2024. Of the four business segments of ABS-CBN, only the media networks and studio entertainment division was profitable in 2018, reporting a P2.5 billion net income for the year.
This division, the one laying the golden egg, was the one covered by the stop-order from the National Telecommunications Commission.
According to GMA Network’s analysis, ABS-CBN’s broadcasting operations contribute close to 47 percent of revenues, far less reliant than the 88 percent contribution of its broadcast operations to the Kapuso network’s revenues.
On the other hand, the three other ABS-CBN segments – cable, satellite and broadband (including Sky Cable), digital and interactive (including iWantTV), and consumer products and experiences (including Kidzania and O Shopping) – had been a drag, suffering a combined loss of P623 million in 2018 alone.
Along with the ANC News Channel and the ABS-CBN website, those three money-losing segments are by and large not covered by the government-directed stoppage.
On the granular level, ABS-CBN and its various subsidiaries had 6,730 regular and 900 non-regular employees, and another 3,325 talents and project-based employees as of end-2018, three times more than the GMA Network’s.
That year, the manpower contingent cost the Lopez network P6.1 billion in combined salaries, bonuses, retirement and separation pay, and other employee benefits.
Stated another way, the Kapamilya network’s cash burn for compensation alone works to around P500 million a month.
(According to a pre-martial law reporter of the Lopezowned Manila Chronicle, now San Francisco-based George Nervez, the Lopezes at that time kept the newspaper staff on the payroll for six months after the 1972 shutdown before finally throwing in the towel.)
Apparently in anticipation of its unresolved franchise problem, the network had built up P32 billion in retained earnings by the third quarter of 2019, a cash hoard 14 times bigger than that of GMA Network’s.
What ABS-CBN did not anticipate, nobody did, was COVID-19 and its equally deadly political variant, CALIDA.
Heard through the grapevine
The multinational consumer goods company Unilever and Injap Sia’s Merry Mart remain the steadfast, if lone advertising supporters of the ANC News Channel, with the cable TV channel channeling its shuttered free-TV big sister, Channel 2, with frequent insertions of Dove, Axe, and Breeze commercials.
E-mail: moneygoround.manila@yahoo.com