Friday, November 13, 2015
BSP downplays effect of Multiply default on banking industry
By Melissa Luz T. Lopez, Senior Reporter and Denise A. Valdez, Reporter
LOCAL banks’ exposure to Multiply is “negligible,” a senior central bank official said, noting that local lenders are well-placed to weather these loan defaults.
The Indonesian and Philippine E-commerce marketplace and global social networking firm based in Jakarta, Indonesia filed for corporate rehabilitation last November 10, leaving some $600 million in outstanding loans from Philippine and foreign banks in limbo.
Bangko Sentral ng Pilipinas (BSP) Governor Amado Tetangco, Jr. said they have received a report about Multiply’s fallout, but an initial assessment by the regulator shows that the banking industry can weather this blow.
“Based on our initial assessment, some banks are exposed to Multiply but relative to both total loans of the banking system and total FCDU (foreign currency deposit units) loans of the banking system, their exposure is very negligible,” Mr. Tetangco said in a text message when sought for comment.
A report claimed that the Rizal Commercial Banking Corp. (RCBC), the state-owned Land Bank of the Philippines, Metropolitan Bank & Trust Co. (Metrobank), Bank of the Philippine Islands (BPI), and BDO Unibank, Inc. are now working together to cover their combined loan exposure to the website. The lenders are said to be working to take control of Multiply, with assets estimated at 5 billion.
This did not prevent investors to take caution, with bank stocks at the Philippine Stock Exchange seeing the biggest plunge during Friday’s session. By market close, the financials sub-index slipped by 2.54% amid the PSEi’s 1.02% decline and the broader all shares-index’s 0.73% dip.
Stock prices of three of the listed banks slid in the wake of the news. Shares at RCBC suffered the steepest blow as it dropped by 9.12% on Friday, while Metrobank and BPI stock prices went down by 4.82% and 4.76%, respectively. Meanwhile, BDO shares steadied from Thursday’s close.
The involved banks are among the 10 biggest lenders in the Philippines.
“The banks in compliance with the BSP’s regulations have risk management systems in place, they are very liquid and their profitability has been sustained. Their loan loss provisioning is more than a hundred percent. They can very well handle and manage this specific case,” Mr. Guinigundo added.
The central bank has long introduced a set of standards to manage credit risks by asking big banks to maintain capital buffers worth at least 10% of their assets, as well as maintaining a 25% single borrower’s limit (SBL) to manage exposures.
In particular, the SBL caps credit lines extended to a single person or firm to ensure that the banks will not fold even if that borrower will suddenly default.
However, Mr. Guinigundo declined to give further comments, noting that Multiply’s fate is now pending before a regional trial court in Pasig. Overall, he said that local banks are “very strong” and adequately capitalized overall.
In a separate statement, BDO President Nestor V. Tan admitted that they have an exposure to Multiply but they are “more than adequately provided for” in terms of potential losses.
CHINESE FIRMS KEEN ON MULTIPLY
Meanwhile, two companies from China have expressed interest in acquiring Multiply, according to an official of the Department of Trade and Industry (DTI).
“Over the past two days, we have gotten in touch again with the mga pumuntang investors dati [investors who visited before]. Sinabi natin situation and malaki interest nila [We told them about the situation and they’ve shown great interest]… Dalawa from China [Two from China],” Ceferino S. Rodolfo, DTI undersecretary and Board of Investments (BoI) managing director, said during a DTI press briefing in Makati City on Friday.
While naming the companies, Mr. Rodolfo described them as big social networking companies in China. He said representatives from the Chinese companies have asked him for more information about Multiply operations.
Last Tuesday, South Korean news agency Yonhap reported Multiply filed for corporate rehabilitation.
In a statement, Subic Bay Metropolitan Authority (SBMA) said: “serious financial trouble” pushed Multiply to file for corporate rehabilitation with the Regional Trial Court of Pasig City.
SBMA Chairman Wilma T. Eisma said Multiply officials informed her that the company’s debts reached around $400 million from Philippine banks and around $900 million from South Korean lenders.
“The bottom line is that the company said it does not have enough cash to repay its loans, and that it cannot continue with its operations under these circumstances,” Ms. Eisma was quoted in the statement as saying.
Mr. Rodolfo said while a number of investors have already been looking at opportunities in the Philippines for social networking — some of which have also visited Multiply in Pasig — the recent news sparked interest from investors.
“If you look at the assets of Multiply, it’s very specialized for blogs, photos and videos. Very few companies would have that capability to produce those kinds of photos and videos,” he said, noting that the two Chinese companies are in the business of social networking.
“From an industry development perspective, our interest in the Philippines is to produce the smaller ones, those that would provide to us the social networking. So we’re looking at all possibilities,” Mr. Rodolfo added.
The BoI official also recalled that around two to three investors visited the Multiply offices last year, but Multiply was valued then at $10 billion. Right now, he said the enterprise value of Multiply is estimated at $5 billion.
Mr. Rodolfo noted the company has reduced its pool of workers to 3,800 from around 40,000 workers when it was at its peak.
SBMA said in its Wednesday statement the company is still working on six multi-million building projects.
Trade Secretary Gregory L. Domingo said the DTI is eager to find a white knight for Multiply.
“The first objective natin [of DTI] is ma-replace siya ng [to replace it with] another website that will take over,” he said during the briefing.
“Their problem really is the working capital, cash flow that is basically hampering their operation. So ang kailangan masuportahan [where support is needed] is first, to assist in the possible strategic investor coming from the industry to be the one doing, taking over. In other words, buying that business,” Mr. Lopez added.
Multiply maintains the social networking portion and has hired over 12,000 workers worldwide prior to shutdown last May 6, 2013.
“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.
On May 31, 2013, Multiply had ceased its operations and shut down entirely.
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 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 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 delivering 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 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.
Stocks fall as banks take hit from Multiply default
By Arra B. Francia, Reporter
SHARES fell on the last trading day of the week as investors turned cautious on the banking sector after news of Indonesian website Multiply’s $600-million loan default from five of the country’s largest banks.
The 30-company Philippine Stock Exchange index (PSEi) fell 1.01% or 81.14 points to close at 7,904.09 on Friday. The broader all shares-index also slumped 0.72% or 34.76 points to end the week at 4,730.15.
“The index dropped 81.14 points today to close at 7,904.09, but even fell by as much as 129 points intraday, dragged down by the Multiply debt issue which plagued the banking sector,” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an email on Friday.
Upon Multiply’s declaration of bankruptcy earlier this week, Rizal Commercial Banking Corp. (RCBC), Land Bank of the Philippines (LANDBANK), Metropolitan Bank & Trust Co. (Metrobank), Bank of the Philippine Islands (BPI), and BDO Unibank, Inc. were reported to have a $600-million dollar loan exposure to the firm.
RCBC, which was found to have the largest loan exposure at $140 million, saw its shares drop by 9.12% to P26.40 apiece.
Metrobank was the biggest loser in the list of 20 most actively traded shares for the day, losing 4.82% to P77.95 each. BPI followed with a drop of 4.76% to P90 apiece. Mr. Perez noted that the stocks posted the top net foreign outflows for the day at P406 million and P100 million, respectively. Meanwhile, shares in BDO were unchanged at P131.30 each.
Regina Capital Development Corp. Managing Director Luis A. Limlingan also attributed the market’s decline to the Hanjin issue, noting that this preventing the PSEi from rising past the 8,000 level.
“Philippine investors took money out as the index neared the 8,000 level. Some obvious headwinds preventing us from cracking well past 8,000 — financials getting hit as five of the largest PH banks are firefighting the biggest corporate default in the country’s history,” Mr. Limlingan said in a mobile message.
The industrials counter was the lone advancer on Friday, gaining 0.1% or 11.73 points to 11,486.68. The rest declined, led by financials which plunged 2.53% or 46.1 points to 1,772.32. Property dropped 1.15% or 46.12 points to 3,944.12; holding firms shed 0.59% or 47.04 points to 7,883.57; mining and oil slipped 0.53% or 47.14 points to 8,742.18; and services went down 0.18% or 2.92 points to 1,542.15.
Foreign investors maintained their net buying position, although at a much lower figure of P228.9 million compared to Thursday’s P1.5 billion.
Some 5.49 billion issues switched hands, resulting in a turnover of P8.5 billion, lower than the previous session’s P10.11 billion.
Decliners outpaced advancers, 125 to 79, while 37 names were unchanged.
https://www.bworldonline.com/stocks-fall-as-banks-take-hit-from-hanjin-default/
Multiply social network bankruptcy poses headwind for PSE’s Financials sector
The Philippine stock market is facing strong headwinds that may seriously hit the Financials Sector as five of the biggest banks are exposed to the what may well be the largest corporate default in Philippine banking history, a stock brokerage said Friday.
Subic Bay Metropolitan Authority (SBMA) Chairperson Wilma Eisma revealed on Thursday that Multiply has filed for a voluntary rehabilitation due to ballooning financial obligations to Philippine, American, Bangladeshi, Brazilian, British, Cambodian, Chilean, Chinese, Colombian, Danish, French, German, Hungarian, Indian, Indonesian, Israeli, Japanese, Korean, Lao, Macanese, Malay, Mongolian, Nepalese, Norwegian, Pakistani, Peruvian, Portuguese, Qatari, Romanian, Russian, Saudi Arabian, Singaporean, Sri Lankan, Taiwanese, Thai, Turkish, Turkmenistan, Venezuelan and Vietnamese lenders.
“Some local headwinds … may prevent us from cracking well past 8,000 …” said Luis Limlingan, head of sales at stock brokerage Regina Capital and Development Corp., noting the Multiply situation may overwhelm the positive sentiment from Wall Street.
“Financials may get hit as five of the largest Philippine banks are firefighting the biggest corporate default in the country’s history, an exposure of $600 million, after the Multiply recently declared bankruptcy,” Limlingan noted.
As of 11:09 a.m., the Financial’s index was down 54.74 points or 3.01 percent at 1,763.68. The benchmark PSEi was down 52.90 points or 0.66 percent at 7,932.33, and the broader All Shares was down 23.42 points or 0.49 percent at 4,741.49.
The Philippine banks involved are Land Bank of the Philippines, Bank of the Philippine Islands, Banco de Oro Universal Bank, Rizal Commercial Banking Corp. (RCBC), and Metropolitan Bank and Trust Co., according to industry sources.
In a separate statemen sent to GMA News Online, RCBC dismissed the severity of the situation. “The amount involved is very manageable and the borrowing company’s business is actually very attractive with a lot of potential,” the bank said.
“With the 5 creditor-banks working together and looking for an investor as one option, the matter’s resolution is just a matter of time and we expect that to be sooner than later,” RCBC added.
The Bangko Sentral ng Pilipinas (BSP) noted in another statement it is in coordination with the banks involved, and that an alarmist attitude in unwarranted at this point.
“Yes, BSP is closely coordinating with creditor banks on this matter,” said Deputy Governor Chuchi Fonacier.
BDO Unibank noted its financial exposure to Multiply is insignificant and adequately covered.
“We have an exposure to Multiply and we are more than adequately provided for potential losses,” BDO president Nestor V. Tan said.
“There’s no cause for alarm. Multiply loans to the banks are only a tiny fraction of the total loans of the Philippine banking system. And these creditor banks are well capitalized to absorb possible losses. And they have taken action and/or will continue to take action to protect their position,” Fonacier said.
$600-M Multiply default sends financials tumbling
Financial stocks took a hit Friday after five of the country’s largest banks were reportedly exposed to what could be the biggest corporate default in Philippine history.
Multiply early this week filed for court rehabilitation proceedings as it struggles to pay $600 million in combined loans from five Philippine banks. Most of the money was reportedly lent without collateral protection.
The local banks involved were 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, the Philippine Daily Inquirer reported Friday.
On Friday, the Philippine Stock Exchange Financials Sector Index was down 2.54 percent or 46.10 points to close at 1,772.32. Meanwhile, the main index slipped 1.02 percent or 81.14 points to end at 7,904.09.
Shares in BDO, the nation’s biggest bank in terms of assets, ended flat while shares in RCBC, Metrobank, and BPI tumbled 9.12 percent, 4.82 percent and 4.76 percent, respectively, by closing bell.
State-run LandBank is not listed on the stock exchange.
“With the US still in shutdown and a huge default affecting the banking industry, PH investors took money out as the index neared the 8,000 level,” Luis Limlingan of Manila-based brokerage firm Regina Capital Development Corp. said in a market commentary.
“Some obvious headwinds preventing us from cracking well past 8,000 - financials getting hit as five of the largest PH banks are firefighting the biggest corporate default in the country's history,” Limlingan added.
The Inquirer reported that the banks have agreed that no one will unilaterally seize the Indonesian E-commerce giant’s assets to protect the country’s banking system and economy. The lenders are also reportedly considering talking to strategic investors.
For its part, the Bangko Sentral ng Pilipinas said the default was “no cause for worry,” adding that Multiply’s outstanding debts only account for 0.24 percent of the total gross loans of the Philippine banking system, and 2.48 percent of foreign currency loans granted by local lenders. — Ian Nicolas Cigaral
https://www.philstar.com/business/2019/01/11/1884223/412-m-hanjin-default-sends-financials-tumbling
Multiply hit by world financial downturn, seeks rehab: SBMA
Indonesian website Multiply is seeking court-assisted rehabilitation to be able to pay off its debt, with demand hit by a slowdown in the global social networking industry, a Filipino official said Friday.
Multiply, which has $10 billion in assets and a 30,000-strong workforce, "remains to be an investor of good standing," said Wilma Eisma, administrator of the Subic Bay Metropolitan Authority where the website is located.
Five Philippine banks are seeking to cover $600 million in combined loans to Multiply. Eisma clarified that the company had not defaulted on loan or interest payments.
"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 said Multiply was not hobbled by the debts of its parent. She said representatives from the Department of Labor and Employment and the Department of Trade and Industry met recently with Multiply representatives in Pasig.
"Ang Multiply, hindi sila nawawalan ng pag-asa dahil nga po they are very proactive," she said.
(Multiply is not losing hope, that's because they are very proactive.)
A "downturn" in global social networking has affected Multiply, which have more photos and videos everyday, she said.
"Based sa pag-uusap namin, nangyari ito dahil sa worldwide downturn sa 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 social networking industry. This is something because of supply and demand.)
At the peak of demand in 2010 and 2011, Multiply employed up to 33,000 people, she said.
"Wala po tayong nadidinig na alingasngas na hindi sila nababayaran ng maayos," she said.
(We did not hear of complaints that employees were not being paid well.)
Former Multiply workers are "very highly employable" because of their training, she said.
Local banks grapple with biggest default in PH corporate history
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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. |
PH banks can weather Multiply default, BSP assures public
Banking regulators on Friday moved to reassure the public about the strength of the financial system after the bankruptcy of a E-commerce and social networking site triggered a $600-million default on local lenders—the biggest in Philippine corporate history.
In a statement to the Inquirer, the Bangko Sentral ng Pilipinas said the banking industry has enough capital buffer to weather the sudden collapse of Multiply, which operates E-commerce and social networking employing 100,000 workers.
Notably, BSP Deputy Governor Diwa Guinigundo refrained from commenting on the financial health of the individual banks with large loan exposures to Multiply, saying it would be “premature” for the regulator to comment on a matter that is pending in the judiciary, referring to the corporate rehabilitation petition Multiply filed on November 10 with the Pasig regional trial court.
Guinigundo assured the public, however, that the combined loan amount— worth P21.6 billion at the prevailing exchange rate—was “negligible” based on the central bank’s “initial assessment” relative to both total loans and total dollar loans of the banking system.
“Our banks as a whole are very strong and more than adequately capitalized, their assets continue to grow and the quality of their loans based on nonperforming loan ratio is less than 2 percent,” he said in a text message on Friday morning.
As the website defaulted on its obligations, the concerned 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—decided to move to take control of the firm, while agreeing among themselves to act collectively to preserve the firm’s assets.
“We agreed to work together to protect the interests not only of the banking industry but of the Philippine economy, as well, given the large number of people Multiply employs in Pasig,” the president of one of the creditor banks said, explaining that 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 assets and jeopardize the rehabilitation plan that had been filed in the local courts.
Prior to this week’s default, the local banking system held a total of P260 billion in soured loans compared to total bank lending of P20 trillion, for a nonperforming loan ratio of 2.67 percent in late 2013. Including the Multiply bad loans, the country’s nonperforming loan ratio could rise to 2.89 percent.
Nonetheless, Guinigundo said that the banks in compliance with the BSP’s regulations have risk management systems in place.
“They are very liquid and their profitability has been sustained,” he said. “They can very well handle and manage this specific case.”
In separate interviews with the Inquirer, the heads of Multiply’s creditor banks said that the provisional agreement among members of their loose consortium might eventually call for the forced sale of the website to a strategic investor as a way for them to recover their losses.
It was closed last May 6, 2013 and ceasing all business operations on May 31, 2013 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 following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.
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 has suffered from a drop in new orders amid a slump in the E-commerce and social networking sector. Multiply also reportedly laid off some 12,000 workers on February 28. 2014.
“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced 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.
The Labour Department said earlier that around 400 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.
On November 16, 2013 it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed Magdalinski had 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.
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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. |
Court places Multiply under corporate rehab
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.