Selling state-run RPN could cost government more due to debts

Selling state-run Radio Philippines Network (RPN) is becoming a problem for the government as privatization officials have found that expected proceeds won’t be enough to pay for the television network’s huge debts. The head of the Privatization and Management Office, Jose A.R. Bengzon III, said the government would have to compromise with a number of parties to arrive at a sale, hopefully to pare RPN’s total liabilities of around P5 billion. RPN has been valued by the privatization office’s financial adviser for the planned asset disposal, CLSA Exchange Capital, Inc., but the selling price could not be disclosed until after approval by the government’s Privatization Council. But Mr. Bengzon said RPN is definitely worth less than its accumulated debts. The TV network owes money to the National Telecommunications Commission, the Bureau of Internal Revenue (BIR), and even to former employees who have not been given their retirement benefits, he said. RPN also has substantial trade payables. Mr. Bengzon said his office likewise has exposure to the TV network. Finance Undersecretary Gabriel R. Singson, Jr., head of the privatization council, said RPN is an extremely complicated case for privatization as many issues have surfaced. One scenario, Mr. Bengzon said, is to rank payments in order of priority, with fees owed to regulators coming first, followed by retirement claims, back taxes, and secured and unsecured debt. But such a scheme won’t lead to a deal unless all parties agree to a compromise, he said. For instance, the privatization office is asking the BIR to condone or waive penalties and surcharges on unpaid withholding and franchise taxes. RPN owes P110 million in withholding taxes and P140 million in franchise taxes but interest and charges have piled up, Mr. Bengzon said. BIR commissioner Jose Mario C. Buñag, for his part, said he would have to wait for the formal request, adding it would be "too early" to discuss RPN’s tax liabilities. Mr. Bengzon said CLSA Exchange Capital submitted its valuation report last Feb. 10 and the privatization schedule is now in the implementation phase, in which the government will start scouting for potential buyers. However, approval of shareholders must first be obtained, he said. A 40% block sequestered in 1986 is still being contested by the Presidential Commission on Good Government, and Fareast Managers and Investors Inc. of former employees of businessman Roberto Benedicto, who controlled the media outfit during the Marcos regime. Mr. Bengzon said it would be easier to do that for another state TV network, Intercontinental Broadcasting Corp. (IBC), where the government owns 80%. CLSA Exchange Capital advises the government for both the RPN and IBC sale, but the two will be sold separately. RPN and IBC have been valued at a combined P4.3 billion. RPN has seven television stations including the flagship Channel 9 in Manila, and 14 radio stations. Including Channel 13 in Manila, IBC has five television stations and nine radio stations. Channel 9 sits on Channel 13 property, the four-hectare Broadcast City in Diliman, Quezon City. INTERNATIONAL SCHOOL Mr. Singson said the next big item in the privatization schedule is the 48,832-square-meter Makati property formerly occupied by the International School. A negotiated sale is being pushed after four failed bids, and the two interested parties -- Century Properties, Inc. and the AMA Group of companies -- submitted offers above floor price of P1.186 billion. The sale will likely be sealed within the quarter, the official said. "We are just waiting for a legal opinion by the Department of Justice that the process we have followed is correct," Mr. Singson said. -BY FELIPE F. SALVOSA II, Business World Senior Reporter