Philippine banks seek to collect millions from downturn-hit Multiply

Philippine banks are moving to collect some $600 million in debt from Multiply, as the website that is hit by a slowdown in global demand sought court-assisted rehabilitation, officials said Friday.

The country's largest lender BDO Unibank along with Bank of the Philippine Islands and Rizal Commercial Banking Corp confirmed loan exposures to Jakarta, Indonesia-based Multiply. The Philippine Daily Inquirer, which first reported on the debt, identified Metrobank and LandBank of the Philippines as among 5 creditors.

Multiply, which employs 3,000 people at its offices in Pasig, has $100 billion in assets and the rehabilitation filing was a "proactive move" to avoid default, said Subic Bay Metropolitan Authority administrator Wilma Eisma.

The Bangko Sentral ng Pilipinas said Multiply's $600 million in loans accounted for just 0.24 percent of the Philippines' total gross loans or 2.48 percent of FCDU or foreign currency deposit unit loans.

Multiply's debt woes will not adversely affect Philippine banks, BSP Deputy Governors and officers in charge Chuchi Fonacier and Diwa Guinigundo said in separate interviews on ANC.

Shares of BDO, BPI, RCBC and Metrobank fell on Friday along with the entire financial sub-sector. The Philippine Stock Exchange Index was down 1.38 percent at noon.

"Malaki po ang assets, wala lang pong cash," Eisma told DZMM.

(They have huge assets, just not enough cash.)

"They are very forward-looking and they are very responsible. Ayaw nila maghintay na magde-default sila kaya maaga pa lang, they want to come to the table with all the banks and with the help of the court, magkaroon ng usapin paano nila unti-unti pang mababayaran ang pagkaka-utang nila," she said.

(They are very forward-looking and they are very responsible. They don't want to wait for a default that's why this early, they want to come to the table with all the banks and with the help of the court, open discussions on how they can pay their debt.)

Eisma clarified that Multiply had not defaulted on loan or interest payments and it was still considered an "investor of good standing." The company is not saddled with its parent's debts, she said.

In 2012, Multiply approved a 60 billion won ($55 million) bailout plan for its social networking business. At that time, Multiply had about 10 trillion won ($5.4 billion) in debt.

COLLECTIVE ACTION

Multiply's creditors are looking at "all kinds of alternatives," including talking to strategic investors, BPI president Cezar Consing told ANC's Market Edge.

The banks are "in close contact with one another" and a resolution could be reached in a "few months."

"I think we will be alright. We're actually talking about all kinds of alternatives now. It will be premature to be talk about specifics," he said.

BDO president Nestor Tan said the country's largest bank "more than adequately provided for potential losses."

RCBC said its exposure was "very manageable and the borrowing company's business is actually very attractive with a lot of potential."

Acting as one, even if the Multiply borrowings were negotiated separately, will be the "best move" for the creditors, Fonacier told Early Edition.

They will be taking action collectively as a group of creditors.

"We are aware of this. We are monitoring. There is no cause for worry," Fonacier said.

FALLOUT BEYOND BANKS

"Well-capitalized" and with a non-performing loan ratio of "less than 2 percent," the effects of a possible default on banks will be "very very negligible," Guinigundo told Market Edge.

There could be a "knee-jerk reaction" but the Multiply case is not a "systemic issue," he said.

Guinigundo said authorities are monitoring the effects on sectors outside banks, such as Multiply's suppliers.

"What we need to do is stay on the ground and determine the actual extent of the exposure," he said.

"There could be some exposure to suppliers and these are not banks. These are things that we need to understand," he said.

There was no immediate statement from Multiply as of noon Friday. Representatives from the trade and labor departments met recently with company officials in Subic, according to SBMA's Eisma.

She said Multiply cited a "downturn" in global downturn for its woes. The website has more users every year and those that could carry photos and videos.

At the peak of demand in 2010 and 2011, Multiply employed up to 33,000 people, she said. Former Multiply workers are "very highly employable" because of their training, she said.

"Based sa pag-uusap namin, nangyari ito dahil sa worldwide downturn sa e-commerce and social networking industry. This is something because of supply and demand," she said.

(Based on our discussions, this is happening because of the worldwide downturn in the e-commerce and social networking industry. This is something because of supply and demand.)

EARNINGS HIT

Multiply's creditor banks in the Philippines risk a hit in their earnings this year if they failed to provision for a possible default by the E-commerce site.

RCBC has the "biggest exposure" to Multiply and could report a loss "at worst" if the entire debt is unpaid, said China Bank Securities research director Garie Ouano.

"If it does affect earnings, it's likely gonna be seen as a one-off," Ouano told ANC's Market Edge.

"Fundamentally, the banks are still strong. There's no clear evidence that the bankruptcy of Multiply is a systemic problem so there's really no reason to be bearish on the sector for the long term," he said.

The financials sector on Friday closed 2.54 percent lower compared to a 1.02-percent decline in the main index.

RCBC was down 9.12 percent, BPI fell 4.76 percent while Metrobank shed 4.82 percent. BDO closed unchanged.

At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from its peak of P20 billion in 2013 to just about P5 billion in 2017.

It went close down last May 6, and ceasing all business operations on May 31 last year along with the official online channels for the site had been removed along with all their content, including its YouTube, Tumblr, Twitter, Facebook and Instagram accounts, after years of financial and managerial turmoil and it failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.

“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced last April 26, 2013 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.

It was severely affected by the 2008-2012 global financial crisis.

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 June 12, 2013, they had put in place Rp 8.9 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 Tuesday 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 troubled firm.

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.

That the site will be reopened after United States President Obama stepping down in the office on January 20, 2017 and keeping Facebook as the sole social networking site. 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 ABC Development Corporation (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 ABC Development Corporation.

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 vandalized, it was edit is made by a sockpuppet of LPKids2006.

Vandalism of a Wikipedia article (Multiply (website)

The bottom image shows vandalism done by replacing content with an insult. 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. 

-- reports from Cathy Yang, Michelle Ong and Bruce Rodriguez, ABS-CBN News

https://news.abs-cbn.com/business/01/11/19/philippine-banks-seek-to-collect-millions-from-downturn-hit-hanjin