Remarks of Lopez Holdings' Chairman, Ambassador Manuel M. Lopez at the Annual Stockholders’ Meeting held at ABS-CBN’s Dolphy Theater
June 16, 2014
ABS-CBN Broadcast Center, Quezon City
Your corporation marked its 20th year in 2013, stronger and wiser from weathering the storms that struck during its young corporate life.
My late brother, Eugenio Lopez, Jr. (Geny), organized Lopez Holdings Corporation in 1993, to serve as a vehicle for participating in the Philippine economy, which was predicted to boom after the restoration of democracy; and for supporting national development so that inclusive growth could be achieved with the necessary help from the private sector.
Lopez Holdings, then called Benpres Holdings, was to be the conduit for investments in services vital for the country’s move forward, to catch up with the newly industrialized economies of Southeast Asia.
We successfully tapped the capital and debt markets for new ventures in power generation, cable television, property development, tollways, water distribution and telecommunications. Our P3-billion initial public offering (IPO) was very well received. We also issued long-term commercial papers worth P3 billion and Eurobonds worth US$150 million.
Through additional investments in First Philippine Holdings Corporation (FPH), the latter was able to build up its power generation portfolio, now housed under First Gen Corporation. Through Sky Cable Corporation, now a subsidiary of ABS-CBN Corporation, Filipinos enjoyed unparalleled programming choices. Through Rockwell Land Corporation, the standards for premium property development were established, and continue to be raised.
Through Manila North Tollways Corporation (MNTC), we were able to rehabilitate the North Luzon Expressway and spur development north of Metro Manila. Through Maynilad Water Services, Inc., capital investments benefited 210,000 new households that were connected to the metropolitan water supply. Through Bayan Telecommunications, Inc. (Bayan), customers in Bayan service areas would enjoy superior customer service and thoughtful attention unheard of in the era of monopoly.
We had hoped that all these investments would meet shareholder expectations and provide sufficient returns to pay off the obligations incurred.
Unfortunately, the Asian financial contagion dealt a double whammy to our group of companies. First, it doubled foreign currency debt in peso terms. Second, most of our subsidiaries operated in supposedly deregulated, but in truth, regulated tariff environments that made rate adjustments a lengthy and often painful political exercise, instead of a straightforward business case. Affected companies were Maynilad Water, Bayan Telecommunications, and SKY Cable.
Although we and our partners knew that our projects would be of long gestation, the financial crisis accelerated our company’s need for dividends to service maturing debt. By 2002, we had no choice but to default on direct obligations of US$150.4 million and P2 billion. In addition, we had guarantees over US$361 million in debt of our subsidiaries, which had already defaulted the year earlier.
Facing up to our creditors, we proposed a balance sheet management plan as a starting point for the debt restructuring exercise. We paid goodwill interest semi-annually to show good faith.
Our chairman emeritus, Oscar M. Lopez, then serving as concurrent chairman, president and chief executive officer, directed his team consisting of Angel S. Ong, then chief operating officer now retired, and Salvador G. Tirona, then chief finance officer and now concurrent president and chief operating officer, to pursue consensual agreement with creditors, while ensuring that our core investments in power generation and media would be preserved to anchor future growth.
With your support through the board of directors, the team negotiated for rescheduling or stretched payment terms, sold assets and bought back discounted debt as opportunities arose. The last step in the process was the tender offer for all un-restructured debt and consent solicitation to amend the terms of our loan agreements.
This was done in 2011, at the beginning of my second year as chairman and chief executive of the company. Our creditors were quite receptive and the success of the exercise allowed us to declare that year the first cash dividend of Lopez Holdings since its IPO in 1993.
Financial rehabilitation took close to a decade to complete, with much patience and forbearance from all stakeholders, especially from you, my fellow shareholders who stood by us, and believed like us that the company would recover.
Today, our remaining investees First Philippine Holdings and ABS-CBN, which we fought very hard to keep, are recognized as leaders in their respective industries. Both conglomerates are continually investing in strategic initiatives that will lead to sustainable growth. We will continue to provide parenting support for them to remain strong and viable over the long term.
With their pioneering initiatives, First Philippine Holdings in natural gas, renewable energy and premium property development, and ABS-CBN in convergent mobile and digital TV services, we have lighted a path for future growth.
As in all business ventures, there are risks to be managed, and quite a number of challenges that need to be overcome. At every decision point, we remain guided by the values that have sustained us in the highs and lows of our times: a pioneering entrepreneurial spirit, business excellence, unity, nationalism, social justice, integrity and employee welfare and wellness.
Let us stand together and invest in our country, uplift our communities, and improve every life we touch.
Thank you for your support all these years.