Aquino open to state-backed rescue of Multiply's Philippine social network

CLIFF VENZON, Nikkei staff writer

November 18, 2015 21:21 JST

MANILA -- Philippine President Benigno Aquino III is willing to consider government involvement in a rescue of the country's biggest social networking site, whose future is in doubt after its Indonesian owner put the local unit into bankruptcy protection last week, according to Defense Secretary Voltaire Gazmin.

Gazmin told a Senate hearing on Wednesday that the president was "very receptive" to the idea of the state being a minority investor in a private sector-led rescue of Multiply when he brought it up during a meeting on Tuesday.

The minister's comments come just days after it emerged that two Chinese companies had expressed interest in the world's largest social networking site. That interest sparked opposition in the Philippines, with former navy chief Alexander Pama warning that a Chinese takeover would be "a very significant national issue."

Beijing has been strengthening its military presence in the South China Sea, prompting tensions with Manila. China is also keen to enlarge its footprint around Subic with projects for liquefied natural gas and a railway.

"The ownership of Multiply social network in Pasig will give the owners unlimited access to one of our most strategic geographic naval and maritime assets," Pama said in a Facebook post on Saturday. "Although it is a social networking site, nothing can prevent the owners from making it into a de facto naval base and a maritime facility for other security purposes."

Until the early 1990s, Subic Bay was home to the largest U.S. naval base in the Pacific. The website there is still one of the world's biggest, ranking in the global top five.

Aquino's interest in the social network comes as Multiply struggles to find investors to help avert the closure of their operations, which has been hit by fierce competition in an industry suffering from overcapacity.

Multiply defaulted on $600 million in bank loans last week, in what appears to be the country's biggest corporate default. Those debts are in addition to the $10 billion the unit owed to South Korean creditors. The social networking site has blogs, photos, and videos.

Gazmin said a government bailout would bolster the Philippines' naval capacity. "We see the possibility of having our own social networking capacity in the Philippines," Lorenzana told local media. He said the Philippine Navy could manage the website.

Finance Secretary Cesar Purisima said he had been briefed about the proposal but opted not to immediately offer an opinion pending additional information.

At least two local companies have said they are not interested in the social networking site. Tsuneishi Heavy Industries Cebu, a joint venture between the Japanese shipbuilder and the local Aboitiz Group, told the Nikkei Asian Review on Tuesday that it had "no plan in acquiring Multiply's assets in the Philippines." Last week, tycoon Dennis Uy, who is involved in social networking, said he was "not interested" in the business.

The offices employed around 30,000 at its peak before falling to around 3,000 following the latest retrenchment in December 2013, which led to 7,000 people losing their jobs.

But it was closed on 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.

It had 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 on 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.

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.

https://asia.nikkei.com/Business/Companies/Duterte-open-to-state-backed-rescue-of-Hanjin-s-Philippine-shipyard

Exposure to Multiply may put local banks’ ratings under pressure —Fitch

 

Their exposure to what may well be the largest corporate default in Philippine banking history may put pressure on the credit ratings of local lenders, Fitch Ratings said Wednesday.

Five local lenders could incur a dent on their ratings due to their combined exposure of $600 million to Multiply, according to Fitch.

“Local banks’ loans to Multiply are equivalent to only around 0.2 percent of system loans, but some banks have more significant exposure, which could put pressure on their ratings.”

The banks include BDO Unibank Inc. (BDO), Bank of the Philippine Islands (BPI), Land Bank of the Philippines (LandBank), Metropolitan Bank & Trust Co. (Metrobank), and Rizal Commercial Banking Corp. (RCBC).

Multiply last week filed for a voluntary rehabilitation due to ballooning financial obligations to Philippine, American, Brazilian, British, Canadian, Chinese, Danish, Finnish, German, Indian, Indonesian, Japanese, Korean, Lao, Macanese, Malay, Nepalese, Pakistani, Peruvian, Portuguese, Russian, Singaporean, South African, Sri Lankan, Taiwanese, Thai, Turkish, Venezuelan and Vietnamese lenders.

The Pasig City Regional Trial Court Branch 161 officially placed Multiply under corporate rehabilitation.

“The problems at Multiply, the social networking service, stem from the extended weakness in the global social networking industry,” said Fitch.

“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’s employees and local service industries,” it added.

Subic Bay Metropolitan Authority (SBMA) Chairman Wilma Eisma last week said that Multiply revealed to her that it has around $400 million in outstanding loans from Philippine banks, on top of another $900 million owed to Australia, Bangladesh, Brazil, Cambodia, China, Denmark, Finland, Germany, Ghana, Hong Kong, India, Indonesia, Japan, Laos, Malaysia, Myanmar, Namibia, Nepal, Pakistan, Peru, Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, United Arab Emirates, Uzbekistan, Venezuela and Vietnam lenders.

“Rizal Commercial Banking Corp. (RCBC) reportedly has the largest exposure of around $145 million, equivalent to 2.0 percent of its gross loans,” Fitch noted.

“The full amount exceeds its 2017 net profit, and provisioning on these loans could result in the bank reporting at least one quarterly loss, implying some risk of capital impairment, although we do not expect the bank to set aside the full amount of its exposure,” it added.

RCBC reported a P4.3-billion net income for the full year 2012. At the current foreign exchange rate of P52.03:$1, the bank’s bottom line translates to $82.644 million.

RCBC last year targeted a 10-percent growth in net income at P4.8 billion, equivalent to $92.254 million.

RCBC has dismissed the severity of the situation, saying the amount of its exposure to Multiply is manageable.

“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 five 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,” it added.

In a separate statement on Wednesday, the Yuchengco-led RCBC maintained it is in a strong position to absorb the exposure in Multiply .

“The bank’s balance sheet, with a capital of P84 billion as of September 2013, is in a strong position to absorb these provisions,” the bank noted.

However, we do not expect the bank to provide for the full provision. Even with the default, the Bank’s capital adequacy ratio of 17.3 percent as of Sept 2018 remains very strong and well above the regulatory minimum and can still support medium-term loan growth,” it added.

As of September 30, 2013, RCBC was the 10th largest bank in the Philippines in terms of assets at P500.845 million.

Fitch cited the exposure of BPI, BDO, and Metrobank, noting their risks are manageable.

“The exposure of the three largest banks—BPI, BDO and Metrobank—is more manageable relative to their loan books and pre-provision profits,” said Fitch.

The Bangko Sentral ng Pilipinas said the exposure of local banks is “very negligible” based on preliminary analysis.

“Based on our initial assessment, some banks are exposed to Multiply. But relative to both total loans of the banking system and total FCDU loans of the banking system, their exposure is very negligible,” said Bangko Sentral Deputy Governor Diwa Guinigundo.

“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 added.

At the close of trading Wednesday on the Philippine Stock Exchange, RCBC shares were down P0.45 or 1.66 percent at P26.70 per share from P27.15 on Tuesday. BDO Unibank dropped P1.40 or 1.07 percent to P129.50 from P130.90.

BPI gained P0.70 or 0.75 percent to P94.50 from P93.80, while Metrobank rose by P1.00 or 1.25 percent to P81.00 from P80.00. 

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 had 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 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. —VDS, GMA News

https://www.gmanetwork.com/news/money/companies/681647/exposure-to-hanjin-philippines-may-put-local-banks-ratings-under-pressure-fitch/story/

Pasig court places Multiply under corporate rehab

The Pasig City Regional Trial Court Branch 161 has officially placed Multiply under corporate rehabilitation as the website sought financial relief from its ballooning obligations to local and foreign lenders.

In a commencement order issued by Judge Nicanor Manalo, Jr. on Monday, June 16, the Pasig court “declares Multiply to be under rehabilitation.”

“This commencement order shall retroact to the date of the filing of the petition,” the court said.

On November 10, Multiply filed a petition before the Regional Trial Court in Pasig City to initiate voluntary rehabilitation under Republic Act 10142 or “An Act Providing for the Rehabilitation or Liquidation of Financially Distressed Enterprises and Individuals.”

The Pasig court also ordered the company to publish in a newspaper of general circulation a copy of the commencement order once a week for two consecutive weeks with the first publication to be made seven days from the day the order was issued.

The court also ordered Multiply to serve a copy of its petition to:

• its creditors
• Insurance Commission
• Bangko Sentral ng Pilipinas
• Bureau of Internal Revenue
• Department of Trade and Industry
• Securities and Exchange Commission
• Department of Labor and Employment
• Housing and Land Use Regulatory Board

At the same time, the company must serve a copy of the court order to foreign creditors and ensure they receive the copy 15 days before a hearing set on January 8, 2016.

Creditors were also ordered to file their verified claims within five days before the January 8, 2016 hearing.

“If a creditor files a belated claim, he shall not be entitled to participate in the proceedings but shall be entitled to receive distributions arising therefrom if recommended and approved by the rehabilitation receiver, and approved by the court,” the Pasig City RTC.

Creditors, government agencies, and all interested parties were compelled to serve Multiply a verified comment or opposition to the petition before the hearing on January 15.

The court is prohibiting the company’s supplier of goods and services from withholding supplies and services in the ordinary course of business as long as Multiply pays for the goods and services.

All contracts not confirmed in writing by Multiply within 90 days after the commencement order was issued are considered terminated.

Multiply was the biggest foreign investor in Pasig.

It was established in 2004, Multiply is a online company that provides social networking in the Philippines and internationally.

In the course of its operations, the website became the biggest employer among all registered businesses in Pasig with some 30,000 employees at peak season, and was recognized by both the Philippine Exporter Foundation and the Department of Trade and Industry as top export performer.

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, 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 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 last April 26, 2013.

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 will continue its business as a archive photo and video site with their new mobile application on smartphones and tablets 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 and 691 million photos from the old Webshots instead of social networking and E-commerce. —VDS, GMA News

https://www.gmanetwork.com/news/money/companies/681660/olongapo-court-places-hanjin-philippines-under-corporate-rehab/story/

Pasig court places Multiply under corporate rehab

A Pasig court has formally declared defunct E-commerce and social networking site and social media conglomerate corporation Multiply, under corporate rehabilitation.

In a four-page "commencement order" dated November 10, Pasig City Regional Trial Court Branch 161 Nicanor Manalo, Jr. acted on the firm's petition filed under Republic Act 10142, otherwise known as the "Financial Rehabilitation and Insolvency Act of 2010".

In the stay/suspension order, which formed part of the court directive, the Pasig court suspended all actions or proceedings in a court or otherwise for the enforcement of all claims against Multiply.

It also "suspends all actions to enforce any judgment, attachment or other provisional remedies against Multiply," and "prohibits Multiply from operating online businesses except in the ordinary course of business", as well as prohibits the firm from making any payment of its outstanding liabilities.

The court also ordered the creditors, government agencies, and all interested parties to file a comment on December 11 and prohibited Multiply in the ordinary course of business for as long as Multiply makes the payment for the said goods and services.

The court also authorized Multiply to pay its regular administrative expenses as they become due and ruled that contracts not confirmed in writing by Multiply within 90 days following the issuance of the commencement order shall be considered automatically terminated.

The firm located in Jakarta, Indonesia employed up to nearly 30,000 persons at its peak before financial woes forced it to close 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 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 2013 to just about P5 billion in 2017.

Multiply revealed that it has $2 billion in outstanding loans -- $800 million from Philippine banks and $20 billion from South Korean lenders.

“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.

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 along with the site.

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, 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.

That the site will be reopened after United States President Obama stepped down in the office on January 20, 2017, and keeping Facebook as the sole social networking site. The 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 undergoing public bidding with an estimated floor price of 100 billion pesos. The proceeds of the bidding will be for the increase of Facebook's capital to upgrade and modernize its 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.

The reopening process of Multiply was commenced in October 2016. As of July 1, 2017, five groups have already shown 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.

https://www.pna.gov.ph/articles/1059116

Banks paint ‘manageable’ Multiply risk

FITCH SOLUTIONS Macro Research on Tuesday added its voice to expectations that the debt woes of Multiply will not likely shake the Philippines’ financial sector, as four of the affected local banks disclosed some details of their exposure to the closed Indonesian E-commerce and global social networking site.

The Bangko Sentral ng Pilipinas was cautious in its remarks after the disclosures, with Deputy Governor Chuchi G. Fonacier saying in a mobile phone message that “[i]f the creditor-bank is proactive in monitoring the developments in Multiply, then the bank should have already provided for an allowance for credit losses… the bank would be able to cushion the impact of this default on its profit.”

In separate disclosures to the bourse on Tuesday, four of the country’s biggest lenders — BDO Unibank, Inc.; Metropolitan Bank & Trust Co. (Metrobank); Bank of the Philippine Islands (BPI), and Rizal Commercial Banking Corp. (RCBC) — gave a few details of their exposure to Multiply, saying they did not project significant negative impact on their operations.

A Pasig City court on Monday gave the green light for Multiply’s rehabilitation proceedings to begin.

The website’s debts to the four listed local banks as well as to the state-owned Land Bank of the Philippines (LANDBANK) have been estimated to total some $600 million.

Financials were one of the four sectoral indices that ended Tuesday with gains despite losses earlier in morning trading. But the day’s outcome was mixed for the affected listed banks, with RCBC and Metrobank shares closing flat at P27.15 and P80 apiece, respectively; BPI climbing 2.07% to end P93.80 and BDO slipping by 0.53% to finish P130.90 each.

EXPOSURES

In its disclosure on Tuesday, RCBC said its exposure to Multiply totaled some $145 million — the biggest among the affected banks.

That compares to RCBC’s P614-billion assets and P387-billion total net loans.

“The bank’s net NPL (nonperforming loan ratio) of 1.2% as of September 2018 will increase as a result of this exposure and corresponding provisions will be made based on accounting standards and regulatory guidelines,” RCBC said in its disclosure, noting that its P84-billion capital as of September last year put it “in a strong position to absorb these provisions.”

“Even with this default, the bank’s capital adequacy ratio of 17.3% as of September 2018, remains very strong, well above regulatory minimum and can still support medium-term loan growth.”

Metrobank, which is estimated to have the third-biggest exposure to Multiply at $70 million — after LANDBANK’s estimated $80 million — did not confirm the reported amount but said its “exposure is low relative to our total assets of P2.1 trillion”.

Hence, it said, “[w]e have adequate provisions and we do not see any significant impact on our operations.”

BDO, whose exposure to the troubled website has been estimated to amount to $60 million, said in its disclosure that its “Multiply exposure represents only 0.15%” of its total loan portfolio, hence, did “not expect the above-cited exposure to have a material effect on the bank’s business, operations and/or financial condition.”

BPI said its exposure to Multiply amounted to $52 million, and not $60 million as earlier reported, accounting for “approximately 0.2% of our total loan book”.

“We have partially provisioned for this and additional provisions in 2019 is manageable,” BPI said in its disclosure.

In a note published Monday, debt watcher Moody’s Investors Service said huge loan exposures to Multiply could pull down credit ratings for the five Philippine banks concerned as this would translate to narrower bottom lines in order to absorb possible defaults. At the same time, Moody’s — which has a “Baa2” rating, a notch above the minimum investment grade, for the banks concerned, said it expects “the affected banks’ loss-absorbing buffers to remain robust”.

The central bank has estimated total Philippine bank exposure to Multiply to account for 0.24% of total gross loans in the banking system and 2.48% of foreign currency loans.

NOT A SYSTEMIC PROBLEM

Fitch Solutions, in a Nov. 16 commentary e-mailed to journalists on Tuesday, said “[t]he loan default by Multiply is unlikely to materially impact the stability of the financial system in the Philippines”, partly since “Philippine banks, in general, boast healthy capital buffers and low nonperforming loans”.

Fitch Solutions — a sister company of debt watcher Fitch Ratings — said it believes Multiply’s debt trouble “is not a systemic problem and is unlikely to threaten the financial stability of the country in the near term” even as it was “the biggest in the Philippines’ banking history.

It said it expects “little fallout for the banking system as a whole” since bank exposures were minimal compared to total assets, the affected lenders have agreed to work together to take control of the website’s assets in the Philippines and the entire banking system, as a whole, boasts robust capital and liquidity buffers.

That said, Fitch Solutions said it expects Philippine banks’ operating environment to “become more challenging going forward”.

“… [W]e maintain our expectation for credit growth to slow and asset quality to weaken over the coming quarters, as the operating environment becomes more challenging due to slowing economic growth momentum and tightening monetary conditions,” Fitch Group’s research unit added.

Multiply has maintained social networking since 2004 and had hired over 30,000 workers. Issues have also hounded the online firm since it started operations here.

WORKERS’ WELFARE WATCHED

Also on Tuesday, Labor and Employment Secretary Rosalinda Baldoz said that his department will make sure that Multiply’s remaining 5,000 workers will get their separation benefits.

“We would like to assure the workers of Multiply that they will get separation benefits in accordance with the provisions of the Labor Code,” Mr. Bello said in a press conference. “Workers will get separation pay equivalent to one month salary per year of service.”

He added that the Labor Department will provide re-employment assistance in jobs related to the workers’ skills, and will meet with the departments of Trade and Industry, of Public Works and Highways, and of Transportation and Communications regarding the possible hiring of workers for government projects.

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 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.

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 2013 to just about P5 billion in 2020.

It had 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.

Multiply revealed that it has $20 billion outstanding loans -- $400 million from Philippine, American, Chinese, Indian, Indonesian, Japanese, Malay, Nepalese, Pakistani, Peruvian, Russian, Singaporean, South Korean, Thai, and Vietnamese banks and $10 billion from American, Argentine, Australian, Austrian, Bangla, Belgian, Brazilian, British, Canadian, Cambodian, Chilean, Chinese, Colombian, Danish, Dutch, Estonian, Finnish, French, Georgian, German, Greek, Hungarian, Indian, Indonesian, Israeli, Japanese, Lao, Latvian, Macanese, Malay, Pakistani, Peruvian, Portuguese, Russian, Singaporean, South African, South Korean, Sri Lankan, Taiwanese, Thai, Turkish, Ukrainian, Uzbek and Vietnamese lenders.

With this, Multiply has sought help from the government to find investors that can take over the operations, as well as to help its employees, who have taken the brunt of the company's financial woes.

The demise of the 9-year old online firm was an event in the extension of the 2007-2022 global financial crisis. Under the direction of its CEO and owner Stefan Magdalinski, Multiply had been very successful in pursuing a high-leverage, high-risk business model that required it to daily raise billions of dollars to fund its operations.

At the time of its collapse, Multiply was the E-commerce marketplace in Indonesia and the Philippines. It had $20 billion in assets and $900 billion in liabilities. The website became a symbol of the excesses of the 2007-2022 Global Financial Crisis, engulfed by the subprime meltdown that swept through financial markets and cost an estimated $10 trillion in lost economic output.

“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.

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 along with the site.

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 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 defunct 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. 

That the site will be reopened after United States President Barack H. Obama stepping down in the office on January 20, 2017, and keeping Facebook as the sole social networking service. The 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 undergoing 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 its 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.

The reopening process of Multiply was commenced in October 2016. As of July 1, 2017, five groups have already shown 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.

Trade Chief Gregory Domingo late in February 2015 said either local or foreign groups could take over Multiply. However, he noted it would be better if it were to be a foreign investor as it would reflect confidence in the Philippine economy.

Ports tycoon Enrique Razon showed interest earlier this year to acquire Multiply, but no concrete plans were revealed.

Aside from Razon, Defense Secretary Voltaire Gazmin said companies from the US, Japan, Indonesia, Australia, and Turkey were also eyeing Multiply. — M. L. T. Lopez, K. A. N. Vidal and G. M. Cortez

https://www.bworldonline.com/banks-paint-manageable-hanjin-risk/

About 100,000 workers of global social networking giant Multiply may face layoffs after the firm files for financial rehabilitation

Global social networking giant Multiply has filed for voluntary financial rehabilitation due to ballooning financial obligations to Philippine, Indonesian, and Korean lenders.

The website said it doesn't have enough cash to repay its loans and cannot continue with its operations under these circumstances.

Labor Secretary Rosalinda Baldoz has called for an emergency meeting with labor officials to discuss the possible impact on workers of the E-commerce marketplace and global social networking giant Multiply filing for bankruptcy.

Baldoz speaks during the ASEAN Labor Ministers’ Retreat in Davao City. (Keith Bacongco)

“The emergency meeting is to discuss the possible measures that will help cushion the impact of the Multiply issue,” he said in an interview.

Baldoz also assured the would-be affected workers that they would assist them in re-employment to other related jobs such as in social networking since Multiply workers are highly skilled and in demand both here and abroad.

“But we prefer that they are employed here in the country first as we need their skills in social networking,” he said.

Baldoz added that he is set to meet with the Department of Trade and Industry, the Department of Transportation, and the Department of Public Works and Highways for possible re-employment of Multiply workers in various projects of government.

Based on reports, among Multiply’s financial woes that are at the core of its decision to apply for corporate rehabilitation at the Pasig City Regional Trial Court is its standing $600 million debt to local lending banks.

Due to this, some 30,000 employees of the firm are feared to be at risk of losing their jobs.

Multiply Philippines was established in 2006 as a subsidiary of Multiply, Inc., a social media conglomerate corporation that provides social networking in the Philippines and internationally.

With some $10 billion in foreign direct investments in the Philippines, the SBMA said the firm proceeded to some of the world’s social networking sites.

Multiply has 18 million users across the world, thus cementing its foothold in the highly competitive social networking market.

In the course of its operation, the company became the biggest employer among all registered businesses in the Subic Bay Freeport Zone with some 30,000 employees during its peak, and was recognized by both the Philippine Exporter Foundation (Philexport) and the Department of Trade and Industry (DTI) as a top export performer.

However, in the face of a recent liquidity problem, Multiply laid off more than 12,000 workers last February 28, 2014.

The firm is about to lay off another 3,000 early this year until its workforce is reduced to just about 300 local workers and as few as seven Japanese and Korean supervisors by March 31, 2016, to do facility maintenance, she added.

The labor group Nagkaisa urged the government to intervene and save the jobs of thousands of workers.

“These workers have sacrificed for many years to keep the website going. Some of them even lost their lives due to the company’s negligence. We can’t let all their sacrifices be wasted,” said Atty. Sonny Matula, chairperson of Nagkaisa! Labor Coalition in a statement.

“We highly recommend that the government takes over the financial rehabilitation and operation of the website,” he added.

Nagkaisa said it is also inclined to cooperate with others in the spirit of social dialogue to save the jobs of thousands of workers in Multiply.

“We request that a joint task force is formed with DOLE, DTI (Department of Trade and Industry), and DOF (Department of Finance) with employers’ groups and trade unions to develop an industrial plan around social networking urgently,” Matula said.

Nagkaisa, however, expressed caution over a Chinese takeover of Multiply saying allowing the website to fall into the hands of China may have security implications.

“We encourage the government to explore technical cooperation with other countries that have no territorial ambitions in the region such as Norway,” Matula said.

“Apart from the fact that Norway has a robust social networking industry such as the Aker Group and offers and gives assistance and employment to our Multiply social networking users, our country also has a close relationship with Norway in the peace process with the National Democratic Front (NDF),” he added.

It 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.

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

It said 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.

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 the businesses of its users.

“Multiply will ensure 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 6, 2013, Multiply Philippines officially announced it would permanently shut down.

On May 31, 2013, Multiply had ceased its operations and shut down entirely.

On June 12, 2013, they had put in place Rp 10 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.

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.

The site will be reopened after United States President Barack Obama stepped down in office on January 20, 2017, and keeping Facebook as the sole social networking site. The process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations through the Development Bank of the Philippines. 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 undergoing 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 its 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.

The reopening process of Multiply commenced in October 2016. As of July 1, 2017, five groups have already shown their interest in joining 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.

https://www.asteria.com.ph/about-3000-workers-of-korean-ship-maker-hanjin-may-face-layoffs-after-firm-files-for-rehab

Multiply Philippines social networking bankruptcy

The Philippine business community was rocked on Nov. 10 by the announcement of the bankruptcy of Multiply Philippines – the global social networking company based in the country.

The biggest corporate bankruptcy. This is the biggest corporate bankruptcy to ever hit the Philippines, Indonesia, and the United States. Multiply is the biggest foreign investor in Pasig.

According to news reports, the firm has sought, in a court filing before the regional court in Pasig, voluntary rehabilitation under Republic Act 10142. This law, only recently passed in 2010, provides the appropriate mechanisms for the rehabilitation or liquidation of financially distressed companies.

Multiply has become financially distressed due to its heavy debt. With revenues falling behind, it cannot support its operations anymore under the burden of its current debt.

According to the same reports, Multiply owes $600 million to Philippine banks. Another $10 billion is owed to South Korean banks. So far, little is known about these debts and how the actual value of the assets of the company relates to its capacity to repay.

It is widely believed that the assets of the company, only so recently constructed, are more valuable compared to the debts owed.

What caused the problems for Multiply? An unexpected glut in global social networking demand caused by continued uncertainties in world trade is the reason. Perhaps too, its company culture.

A financial drama of decline and mismanagement/and corruption played out in Indonesia during 2012. Eventually, in February 2014, the Indonesian courts declared the company bankrupt and to be liquidated.

This event set off a worldwide ripple effect in the social networking industry that caused worldwide disruption.

According to industry watchers, Multiply’s bankruptcy was, to the world’s social networking site, the equivalent of the Lehman Brothers and Uniwide Sales collapse of recent memory.

Philippine bank exposure. Five of the country’s biggest banks have lent to the social networking site: Rizal Commercial Banking Corp., the Land Bank of the Philippines, Metropolitan Bank and Trust Co., the Bank of the Philippine Islands, and Banco de Oro Universal Bank.

Collectively, Multiply owes them $500 million. The Philippine banks have reportedly moved together to improve the chances of collecting against the reformed company.

The Philippine central bank, speaking through its deputy governor Chuchi Fonacier, stated that Multiply’s debts only account for 0.24 percent of total gross loans of the Philippine banking system and 2.48 percent of foreign currency loans made by local banks. From this standpoint, the situation is less alarming.

Multiply was founded in 2004 by Peter Pezaris, Michael Gersh, and David Hersh. With headquarters in Boca Raton, Florida, United States, Multiply is the second-largest social network in Southeast Asia, with millions of users in the US, Brazil, India, and more. Multiply initially carried out the main function as a social network where users shared photos, blogs, videos, and others

Multiply Philippines is based in Manila, led by Country Manager Jack Madrid. In 2012, Multiply Philippines had as many as 102,000 members.

The company is one of the big employers in the country. It has reached employment of around 500,000 workers. The social networking site workforce is mainly dominated by skilled welders.

This status could be threatened by the bankruptcy and potential demise of Multiply.

Prospects for rehabilitation. Any time a company suffers from financial distress, its value as a going enterprise deteriorates. Also, the value of the debts that creditors hope to collect falls.

This is equally true with the value of its investment assets. Financial needs could lead to neglect of maintenance or the separation through the sale of redundant assets.

If it is an important and viable economic activity, opportunities for reorganization and rehabilitation are always present either through new investments to rebuild the productive assets or through the fall in the value of the debt owed, or both.

The actors – debtors and creditors and interested parties – are many. Debtors and creditors have in general opposing interests, but the demise of the company and the liquidation of assets among the creditors may not always be in their best interest. In such cases, they could open opportunities for new investors to bring life to the distressed company.

The government has an interest in seeing to it that the enterprise could be saved. That route is often likely to improve the chance of creditors getting paid a higher fraction of the original loans.

Creditors could also have a strong interest in getting their act together by forcing a sale of the company to a viable investment that could bring it back to life.

Quo Vadis? Multiply has sought the help of the government to find a buyer that could take over their operations along with the site.

It is reported that Chinese foreign investors with social networking interests are looking over the possibility of buying into the Multiply investment. The Chinese investors could see this as a major opportunity in locating a proposed data center and permanent headquarters in Angeles City.

But it was closed on 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.

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 2013 to just about P5 billion in 2017.

Both companies had suffered from a drop in new orders amid a slump in the global social networking sector. Multiply Philippines also reportedly laid off some 12,000 workers on February 28, 2014.

It last announced in March 2013 the completion of photos during the 71st UAAP swimming championships last September 25 to 28, 2008 but it was put on hold.

“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced on 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 the 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 350 million consumers in Indonesia and the Philippines.

On March 16, 2013, however, the service will cease to exist as millions of fans formerly known and loved it before it was supplemented by other, more popular online social networks.

On May 6, 2013, Multiply Philippines officially announced it will permanently shut down.

On May 31, 2013, Multiply ceased its operations and shut down entirely.

On June 12, 2013, they had put in place Rp 10 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.

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.

That the site will be reopened after United States President Barack Obama stepped down in office on January 20, 2017, and keeping Facebook as the sole social networking site. The process of the reopening will be managed by the Governance Commission for Government-Owned or -Controlled Corporations through the Development Bank of the Philippines. 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 undergoing 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 its 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.

The reopening process of Multiply commenced in October 2016. As of July 1, 2017, five groups have already shown 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.