PSE Circular for Brokers No. 570-99

March 23, 1999 PSE CIRCULAR FOR BROKERS NO. 570-99 March 22, 1999 Philippine Stock Exchange PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Ms . Eileen M . Lacorte/Ms . Grace de Guia Listing and Disclosure Group Ladies and Gentlemen : We refer to your fax letter requesting us to clarify the news article captioned "More difficulties for Piltel if Marubeni turns down debt repayment proposals", published in the March 22, 1999 issue of Business World. The article reported that Marubeni had rejected a Piltel proposed repayment scheme for its loans. We advise that, at this stage, Piltel continues to explore and discuss with Marubeni options for the payment of its obligations to Marubeni, with the objective of arriving at a mutually acceptable repayment scheme in due course. Among the options being considered are those earlier reported in the Business World. Thank you for giving us the opportunity to clarify the news article. With kindest regards. LLjur Very truly yours, (SGD.) MA. LOURDES C. RAUSA-CHAN Corporate Secretary More difficulties for Piltel if Marubeni turns down debt repayment proposals By May Czarina A. Baetiong Reporter Beleaguered cellular phone company Pilipino Telephone Corp. (Piltel) may find itself in yet another difficult situation should Japan's Marubeni Corp. reject its repayment proposals, telecommunication analysts said. Last Friday, the market was abuzz with talks that Marubeni had rejected a Piltel-proposed repayment scheme for its loans. BusinessWorld earlier reported that Piltel was considering three options to repay its obligations to the Japanese firm: a joint-venture agreement and possible conversion of Marubeni's loan into equity, a lease agreement or delaying principal and interest payments. BusinessWorld was told that Marubeni and Piltel were working on an agreement two weeks ago, but failed to reach a compromise. The BusinessWorld source, who spoke on condition of anonymity, however declined to say which of the three options Piltel offered but which Marubeni turned down. When sought for comment, Marubeni corporate communications had in Tokyo Toshikazu Kashino declined to comment. Piltel's $279-million obligation to Marubeni is one of its biggest liabilities. The Japanese firm installed Piltel's land lines in Mindanao, in accordance with Executive Order No. 109 which mandate cellular telephone companies to install 400,000 telephone lines in their assigned service areas. OCBC Securities research manager Dipak Jethwa said Piltel's Marubeni loan is almost third of its total P34.9-billion debt. "It is going to come up on their books unless they do some refinancing," he said. "But should Marubeni turn the offer down, it will definitely have some setback to whatever negotiations Piltel is in at the moment," he added. This view was shared by Helen Alvarez, research director of All Asia Capital and Trust Corp., who said that if Marubeni loan was not addressed properly, it could translate to net losses up to year 2000. Another analyst, who requested anonymity, said should the Japanese company refuse to compromise, the it will have a negative impact especially on local banks. "If (negotiations) did not work with the big banks or big creditor groups like Marubeni, what more with the small ones, the analyst said. "("The Marubeni loan) is a big loan and it might not set a good precedent to other creditors." LLphil Piltel has been separately negotiating with three creditor groups: its banks, suppliers and bondholders. The creditor banks have form a steering committee with Chase Manhattan Bank as the lead negotiator. Two weeks ago, Piltel's new management presented a business recovery plan focusing on the company's organizational structure. billing and collection procedures, information technology, marketing and customer service and network infrastructure. Piltel officials pointed out that as currently structured, the company is incapable of servicing its P34.9-billion debt. In a breakdown of its P34.9-billion outstanding obligations as of Dec. 31, 1998, Piltel has P16.3-billion($408 million)dollar-denominated loans, 66% ($268 million) of which is in the form of convertible bonds, 21% ($87 million) in long-term loans and 13% ($53 million) in short-term loans. Its peso-denominated loans account to P7.45 billion of its total obligations. Its short-term loans amount to P2.7 billion while long-term obligations reached P4.7 billion.