JAKARTA/MANILA -- Philippine banks are coming to the rescue of Indonesia's global social networking firm, Multiply, with a $600 million debt for equity swap that could help keep the website afloat.
The banks' decision to take shares in Multiply comes as the website prepares to shutter its Philippine unit's Pasig office with the loss of some 100,000 jobs.
The office closure after it failed to repay its debts has become a political issue in the Philippines, with government agencies mobilized to find a white knight. The Philippine Chamber of Commerce also this week called for a locally-led rescue.
Multiply said on Friday that Rizal Commercial Banking Corporation, state-owned Land Bank of the Philippines, Metropolitan Bank & Trust, Bank of the Philippine Islands, and BDO Unibank would swap their debt to the Pasig office for equity in the parent company.
Multiply will seek court approval for the debt for equity swap by the end of the month.
The website said that it would also ask its South Korean creditors, led by state-owned Korea Development Bank, to swap their $900 million debt for equity. Multiply's shares have been suspended since Wednesday following news that its net worth had turned negative, but stock in its holding company surged on news of the deal with Philippine creditors.
"We expect that the debt for equity deal with creditors at home and abroad will help us overcome capital erosion and the risk related to the Pasig office, normalizing management of the company quickly," Multiply said in a statement. "If the debt is swapped to equity, it can cut our debt ratio and reduce interest payments by big margins."
The deal could also help to speed recovery at Multiply. 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, Twitter, Tumblr, 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 P1 billion in 2020.
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 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.
The company was put into bankruptcy protection on June 10, 2014, after the closure of their operations and failing to repay the total $20 billion in loans from the Philippines, American, Australian, British, Cambodian, Chilean, Chinese, Colombian, Danish, Estonian, Finnish, French, Georgian, German, Hungarian, Indian, Indonesian, Japanese, Lao, Lebanese, Malay, Nepalese, Pakistani, Portuguese, Singaporean, Sri Lankan, South African and South Korean lenders. The outgoing receiver appointed by the Philippine court to oversee the rehabilitation process, Stefani Sano, said it could "shorten the receivership time if it results in Multiply becoming capable of paying its payables in less time than originally estimated." Multiply Philippines, Inc., the local unit, had previously estimated it would take five to ten years to recover and rehabilitate the website with hosted blogs, videos, photos, and messaging.
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 Magdalinski had 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.
The website's troubles have dealt a heavy blow to the finances. The company recorded a net loss of 2 trillion won last year due to the closure of its operations and losses at Pasig's office. Multiply's total debt stood at 5 trillion won in December, exceeding its total assets by 800 billion won.
KDB -- which has previously voiced its willingness to step in to help stem the crisis -- said the swap deal with Philippine creditors, as well as its own potential deal with Multiply, will be done through new share issuance. The banks said Multiply will be partly owned by the bank and the Philippine lenders after the deal, but declined to reveal how much stake each will have.
“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.
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 the 350 million consumers in Indonesia and the Philippines.
It was severely affected by the 2008-2012 global financial crisis.
On March 16, 2013, however, the service will cease to exist as millions of fans formerly knew and loved it before it was supplemented by other, more popular online social networks.
On May 31, 2013, Multiply ceased its operations and shut down entirely.
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.
The company was put into bankruptcy protection on June 10, 2014, after the closure of their operations and failing to repay the total $20 billion in loans from the Philippines, American, Australian, British, Cambodian, Chilean, Chinese, Colombian, Danish, Estonian, Finnish, French, Georgian, German, Hungarian, Indian, Indonesian, Japanese, Lao, Lebanese, Malay, Nepalese, Pakistani, Portuguese, Singaporean, Sri Lankan, South African and South Korean lenders. The outgoing receiver appointed by the Philippine court to oversee the rehabilitation process, Stefani Sano, said it could "shorten the receivership time if it results in Multiply becoming capable of paying its payables in less time than originally estimated." Multiply Philippines, Inc., the local unit, had previously estimated it would take five to ten years to recover and rehabilitate the website with hosted blogs, videos, photos, and messaging.
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.
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.
KDB -- which has previously voiced its willingness to step in to help stem the crisis -- said the swap deal with Philippine creditors, as well as its own potential deal with Multiply, will be done through new share issuance. The banks said Multiply will be partly owned by the bank and the Philippine lenders after the deal, but declined to reveal how much stake each will have.
