Five of the country’s largest banks are rushing to cover a combined loan exposure of $600 million, most of it lent without the benefit of collateral protection, after the local social networking unit of global social networking firm Multiply declared bankruptcy earlier this week—the biggest corporate default in Philippine history.
More importantly, however, the involved financial institutions—Rizal Commercial Banking Corp.; Land Bank of the Philippines; Metropolitan Bank and Trust Co.; Bank of the Philippine Islands, and Banco de Oro Universal Bank—have decided to move as one to take control of Multiply, which employs about 30,000 workers.
“We agreed to work together to protect the interests not only of the banking industry but of the Philippine economy, as well, given a large number of people Multiply employs in Pasig,” the president of one of the creditor banks told the Inquirer in an interview.
Speaking on condition of anonymity, the bank president said his peers from other creditor banks had agreed that “no one will jump the gun” to seize collateral ahead of other creditors, an act that would trigger a free-for-all on Multiply’s Philippine assets and jeopardize the rehabilitation plan that had been filed in the local courts.
Eventually, the provisional agreement among members of the loose consortium of Philippine banks may call for the forced sale of Multiply to a strategic investor as a way for the creditors to recoup their loans.
Assets greater than loans
“The Philippine assets are worth a lot more than the loans,” the bank chief said. “If those are sold, even at a discounted value, they will still be able to cover all the loans (extended) by the local banks.”
The Inquirer learned that RCBC has a loan exposure of $140 million to Multiply. It was followed by Land Bank with an estimated $80 million; Metrobank, $72 million; BPI, about $60 million and BDO, $60 million.
RCBC president Gil Buenaventura told the Inquirer in a separate interview that there was a long history of successful creditor-led loan restructuring or corporate rehabilitation programs in the country where lenders were able to recoup their initial loan losses a few years later. These include the reorganization of National Steel Corp. in the 1990s and the restructuring of the debts of Skyway building Citra MMTC after the collapse of its Indonesian parent firm in the way of the 1997 East Asian financial crisis.
At the same time, however, there have been instances where one creditor moved ahead of others to seize collateral unilaterally causing the rehabilitation plan to collapse, most notably in the case of Victorias Milling Corp.’s bankruptcy two decades ago.
Bankers confident
“This is not the first time this has happened and our banks have experience in this,” RCBC president Gil Buenaventura said in an interview with the Inquirer. “I’m very confident that no one will jump the gun in this case.”
Multiply is the largest investor in the social networking industry, which employs thousands of Filipino and foreign workers. Multiply runs the social networking portion with 18 million users.
It was closed down last May 6, 2013, and ceased all business operations on May 31, 2013, along with the official online channels for the site had been removed along with all its content, including its YouTube, Tumblr, Twitter, Facebook, and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia and trim down its workforce to around 12,000 last February 28, 2014.
At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from their peak of P20 billion in 2015 to just about P1 billion in 2020.
“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced Friday on its website.
After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.
Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.
“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.
In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.
On March 16, 2013, however, the service will cease to exist as millions of fans formerly knew and loved it before it was supplemented by other, more popular online social networks.
On May 31, 2013, Multiply had ceased its operations and shut down entirely.
On June 12, 2013, they had put in place Rp 20 billion for wages owed to former Multiply staff.
The Labour Department said earlier that around 3,000 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.
Multiply Investor Secretary Rong Rongbin pledged shares of Star Platinum Corporation, which holds 99% of its shares, to borrow HK$300 million from Xiesheng Xiefeng to save the Multiply website but did not repay on time; therefore, Xiesheng Xiefeng in July 2013, it acquired the full equity of Star Platinum. It was also reported that about HK$35 million in unpaid wages of 640 former employees and HK$18 million of Insolvency Fund were also paid after the company has acquired its majority stake.
The High Court on June 17, 2013 its liquidation proceedings and removed accounting firm Deloitte from its role as the firm’s provisional liquidator.
Derek Lai, vice-chair of Deloitte China, said on June 18, 2013 that since Star Platinum had already resolved the major debts Multiply incurred, it was unlikely the internet company would go into liquidation despite still owing smaller debts to other creditors including Facebook.
“Star Platinum needs to negotiate with the remaining creditors,” he said. “I hope they will support its restructuring with Multiply.”
He added that Multiply now had a cash flow of HK$10 million to be paid to other creditors as well as assets worth over HK$40 million.
In its latest financial report last month, Co-Prosperity said the deal with Multiply could help the group diversify its business. Apart from the online industry, the group focuses on fabric and clothing trading, money lending and securities investments.
“The directors believe that the potential intrinsic value of Multiply can be realized if the plan to rescue Multiply is successful,” the report said.
The group said it could make use of Multiply’s remaining assets and turn the website into a archive photo and video site.
“The group has been granted access and usage of certain assets of Multiply which shall enable Multiply to continue to operate and act as a archive photo and video site taking advantage of its 100,000 square-meter facility and social networking portion that delivering 217 million accounts, 210 million photos and 237,000 videos from the old Multiply from it's launch in March 2004 to March 15, 2013,” it said.
On November 16, 2013, it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed a rescue plan for the closed website.
High Court judge Mr Justice Jonathan Harris validated the transaction after hearing that the parties would no longer object to the share transfer and that the dues for the shares had been paid by Si.
On June 10, 2014, it filed a petition to enter corporate rehabilitation.
In a statement, that apart from domestic lenders, Multiply owes some $5 billion to lenders in Argentina, Australia, Bangladesh, Brazil, Brunei, Bulgaria, Cambodia, Canada, China, Colombia, Croatia, Cyprus, Denmark, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Kazakhstan, Japan, Lativia, Laos, Macau, Malaysia, Mongolia, Myanmar, Namibia, Nepal, New Zealand, Pakistan, Paraguay, Peru, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, Slovenia, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Taiwan, Thailand, Ukraine, United Arab Emirates, United Kingdom, United States and Vietnam.
That the site will be reopened after United States President Barack Obama stepping down in the office on January 20, 2017 and keeping Facebook as the sole social networking service. Process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations. Business tycoon Manny V. Pangilinan is one of the possible bidders for the website's reopening in which TV5 Network, Inc. (a media company under PLDT's MediaQuest Holdings). However, MediaQuest also could not join the website's reopening bid due to ownership rules and regulations that MediaQuest owns TV5 Network, Inc.
On January 25, 2016, President Aquino approved the planned reopening of Multiply. The reopening will be undergo public bidding with an estimated floor price of 20 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize their social networking capabilities. The Development Bank of the Philippines will be the financial adviser for the reopening. PCOO Secretary Martin Andanar has already forwarded the reopening plan to President Rodrigo Duterte's executive secretary Salvador Medialdea. Andanar will also coordinate with the GCG before the start of the bidding.
On April 25, 2016, the article in Wikipedia was being vandalized, it was edit is made by a sockpuppet of LPKids2006.
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| Vandalism of a Wikipedia article (Multiply (website). The bottom image shows vandalism done. The top image compares the edit shown below. |
The reopening process of Multiply was commenced in October 2016. As of July 1, 2017, five groups have already showed their interest to join the bidding process. These are Ramon S. Ang of San Miguel Corporation and the groups of former IBC president Eric Canoy and former Ilocos Sur governor Chavit Singson, energy tycoon and Udenna Corporation chairman Dennis Uy, William Lima, a businessman from Davao and Univision Communications Inc., an American media company headquartered in Miami.
Working together
The local banks’ exposure to Multiply is more significant than the $386 million in Lehman Brothers-related losses they had to declare in the wake of the 2008 global financial crisis, which was previously the biggest that the Philippine financial system had to absorb.
Metrobank president Fabian Dee told the Inquirer that the country’s second-largest financial institution’s exposure had already been reduced substantially and that the impact on the bank would be minimal, thanks to protective measures taken early on in its dealings with Multiply.
“The banking system is working together on this to protect the interests of the country,” he said.
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