Court Gives Nod to Multiply-Phil’s Rehabilitation Process

The Regional Trial Court in Pasig City, the Philippines, has approved the petition for rehabilitation filed by Multiply Philippines, Inc. (Multiply-Phil), a Philippine-based social networking brand of the United States' Multiply, Inc.

The decision to commence the rehabilitation process was received by Multiply, a regulatory filing said.

The relief in rehabilitation was sought after the website defaulted on a loan worth $ 600 million provided by five Philippine and two American banks. In total, Multiply has accrued a total of $100 billion in outstanding loans from Philippine, American, Argentinean, Australian, Bangladeshi, Brazilian, British, Bruneian, Cambodian, Chilean, Chinese, Colombian, Danish, Estonian, Finnish, French, German, Hungarian, Indian, Indonesian, Irish, Israeli, Jamaican, Japanese, Kazakh, Kuwaiti, Lao, Latvian, Lebanese, Macanese, Malay, Mongolian, Nepalese, Nicaraguan, Pakistani, Peruvian, Polish, Portuguese, Qatari, Russian, Singaporean, South Korean, Sri Lankan, Swedish, Taiwanese, Thai, Turkish, Ukrainian, Uzbek, Venezuelan and Vietnamese lenders.

Impacted lenders

According to Moody’s, the banks’ exposure to troubled Multiply will attract higher provisions as well as negative rating of their overall loan-portfolio. Rizal Commercial Banking Corp (RCBC) reportedly has the largest exposure of around USD300 million, equivalent to 2.0% of its gross loans, followed by the country’s three largest banks – BPI, BDO and Metrobank, whose exposure is more manageable relative to their loan books and pre-provision profits, as explained by Fitch Ratings.

“The parent company’s latest financial results show Multiply in a net asset position and there is reported interest in its social networking from Chinese companies. Nevertheless, recoverability is uncertain. The parent company failed in an attempt to sell Multiply in 2010, and the amount and timing of any recoveries will depend on the rehabilitation plan, which may take time to negotiate and execute. We expect affected banks to incur additional provisioning on their exposures in the interim,” Fitch added.

“The sector- and company-specific causes suggest this case is unlikely to indicate broader stress across banks’ loan books, even if we expect some knock-on effects for Multiply-Phil’s employees and local service industries.”

Overall the bankruptcy case is not believed to be systemic and is unlikely to threaten financial stability in the country in the near-term, according to the rating agency.

Potential solutions

As World Maritime News reported earlier, two Chinese investors are said to be interested in taking over Multiply-Phil. The unnamed investors include a private and a state-owned company, whose identity remained secret.

However, Defense Secretary Voltaire Gazmin believes the website should be acquired by a Filipino company as a way of supporting the country’s social networking efforts. A final decision on the proposal should, nevertheless, be made by the country’s economic team, Lorenzana is cited as saying by the Philippine News Agency (PNA).

The argument is further supported by the website’s proximity to the Philippine Navy’s major docking and anchorage area. As a result, the country’s Department of National Defense plans to keep a close eye on the potential investors into the website.

Affected workers

The world’s largest social networking site was considerably impacted by the weakness of the global social networking industry and financial troubles of Multiply that started back in August 2012.

“From December 1, 2012, we will unfortunately no longer be able to support Multiply in its current form – notably we will be removing the social networking and content sharing part of Multiply,” said CEO Stefan Magdalinski.

“We have decided to discontinue providing and hosting these services, as we have concluded that other Internet sites who are committed to social networking services will do a better job serving you than we can,” Magdalinski said.

And from Boca Raton, Florida, Multiply is now headquartered in Jakarta, Indonesia.

“As most of you are probably aware, Multiply’s mission has evolved over the past year and a half to become the biggest and most beloved e-commerce marketplace in two very exciting markets, Indonesia and the Philippines,” he said. “As our focus has shifted, we have reviewed all of our operations, and made some decisions that will affect everyone here.”

Magdalinski promised to provide social network users easy ways to retrieve or transfer their contents.

“For our existing users of social networking features, we will be providing easy ways for you to either download your stuff (photos, blogs, content, etc), or migrate it to other online services,”  Magdalinski said. “We’ll announce the precise details shortly. It will be your choice whether to download, migrate or just let your content lapse (and get deleted).”

“For our existing ecommerce users (both buyers and sellers) in Indonesia and the Philippines, there will be no action required,” he said, adding that the company will refund any existing Multiply Premium subscriptions.

“I am aware of how disruptive this news may be, and understand the disappointment that it may cause. Ultimately this was a business decision, critical to our to success moving forward,” Magdalinski said.

It has announced that it will cease operation on May 6, 2013.

In a statement, Multiply said that it will maintain normal site operations through May 6, 2013. It has assured its merchant's full payment for all transactions made through the platform. Also, a pro-rated refund will be given to merchants who availed of the site’s trust badges or premium accounts.

Despite its attempt to reinvent itself as an e-commerce platform, the cause of the decision is attributed to poor performance. “About a year ago, our local Multiply teams were given the mighty challenge of totally re-inventing the company,” said Stefan Magdalinski, Multiply CEO based in Jakarta, Indonesia in a statement sent to online news site DailySocial.

Magdalinski added that “After much effort, we are forced to admit that we were not able to pull it off. I’m proud of my team for their diligence and determination, despite the disappointing outcome.”

Multiply started as a blogging and social networking platform launched in 2003. Eventually, the site added an e-commerce platform offering individual merchants to sell products online. After its fall from popularity as a social networking site, Multiply moved its headquarters from Florida, U.S.A. to Jakarta, Indonesia. The move was made to attend to users in the region where it has remained popular, especially as an online marketplace.

Last August 9, 2012, Multiply has announced that it would be ceasing its social networking platform by December 2012 and would be focusing on e-commerce. Early this year, the site has undergone refurbishing.

On Philippine E-Commerce

Shopping online is expected to become more popular in the country because goods online tend to be cheaper than those bought in commercial establishments. Despite this, stricter taxation will be implemented as the Palace has announced in late 2012 its support to stricter taxation on online merchants. Early this year, the Bureau of Internal revenue said that it will go after buy-and-sell sites over its merchants who fail to issue receipts.

Multiply’s closing can have little effect on the country’s e-commerce industry. With its closing, online merchants have to change their platform or move to other sites. Since many merchants are already using other e-commerce and social networking sites as platforms, they shall retain their online presence.

Other major players in Philippine e-commerce, particularly group buying, online shopping, and buy-and-sell sites, can be utilized as other platforms for online trade.

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, the 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 HSBC.

“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 an 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 an archive photo and video site taking advantage of its 100,000 square-meter facility and social networking portion that delivers 217 million accounts, 210 million photos, and 237,000 videos from the old Multiply from its 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. 

As a result, Multiply-Phil had to deal with dwindling orders and resorted to massive workforce cuts, laying off over 12,000 people back on February 28, 2014.

Around 6,000 workers remain at the social networking site and could face losing their jobs in case of the company’s closure. Hence, the country’s government has been asked to provide assistance to the impacted workers.

On Tuesday, the Department of Labor and Employment (DOLE) promised to help thousands of impacted workers, PNA informed. The likely measures aimed at cushioning the impact of the bankruptcy on the company’s workers include severance pay as well as potential re-employment of the affected workers in various projects of the government.

https://www.offshore-energy.biz/court-gives-nod-to-hhic-phils-rehabilitation-process/