PSE Circular for Brokers No. 2575-99

October 11, 1999 PSE CIRCULAR FOR BROKERS NO. 2575-99 PILTEL, CREDITOR BANKS SIGN MEMORANDUM OF UNDERSTANDING AS BASIS OF DEBT-RESTRUCTURING PROCESS The Pilipino Telephone Corporation (Piltel) announced today that it has signed a Memorandum of Understanding (MOU) with its creditor banks setting out the principal terms that will provide the framework for the formalization of its debt restructuring. The MOU which was signed by Manuel V. Pangilinan, President and CEO of PLDT, Piltel President and CEO, Napoleon L. Nazareno, together various domestic and international banks contains the following indicative terms: 50 per cent of the bank debt will be replaced by peso-denominated Piltel convertible preferred stock exchangeable into PLDT convertible preferred stock. The PLDT convertible preferred stock may be converted at the option of the holder at any time from the issue date up to the seventh anniversary of the issue date into PLDT common shares. The conversion price shall be the higher of P 1,700 per share or 50 per cent above the average market price of PLDT common shares over a period of 20 consecutive trading days before the restructuring date, subject to a maximum of P1,850 per share. 25 per cent of the bank debt will be replaced by a 10-year term loan with a bullet payment at maturity. Interest of peso-denominated debt shall be 91-day T-bill rate plus I per cent per annum while US$-denominated debt shall be at 3-month LIBOR plus 1 percent per annum. 25 per cent of the bank debt will be replaced by an amortizing 15-year term loan. Interest shall be set at the same rates as those of the 10-year loan. Piltel, PLDT and the creditor banks intend to utilize the MOU as a basis for the restructuring of approximately US$332 million of Piltel's debt and expect to conclude the agreement by 31 January 2000. llcd Following the signing, Mr. Nazareno said: "After eight months of discussions, I am pleased to say Piltel, PLDT and the creditor banks have reached agreement on this key step in the debt restructuring process. This will help sustain the Company in its recovery efforts and strengthen its cash flow. Furthermore, with this framework in hand, we can begin negotiations with our bondholders. Of course, talks with our other major creditor; Marubeni, are still ongoing."