Philippine Long Distance's Smart receives tenders of 68.4% of Piltel debt, reviewing response

New York, June 1 - Philippine Long Distance Telephone Co.'s Smart Communications Inc. subsidiary said it received tenders of 68.4% of the outstanding debt of cellular phone company Piltel.

Philippine Long Distance and Smart said they are reviewing the response to determine its course of action.

The thresholds for each of Piltel's individual series of debt were met except for its bonds.

"Given the high acceptance level from Piltel's creditors, Smart would still be able to proceed with the transaction," Philippine Long Distance said in a news release. Smart has 90 days to decide.

However, since the 75% threshold for the total of all series of debt was not met, the boards of both Philippine Long Distance and Smart will need to decide whether to go ahead.

If the companies decide to complete the exchange, it is expected to close by the end of July.

The exchange was extended at the beginning of May to May 31.

As of April 30, the old expiration date, holders of 50% of the debt had tendered, below the required threshold.

On April 21 Smart Communications said it had extended its tender offer to April 30 from April 19.

As announced on March 22, Smart Communications is offering either cash in dollars or pesos, dollar-denominated loans or Philippines sovereign-guaranteed bonds.

Options on offer to Piltel creditors are:

* Cash at the rate of $0.40 per $1 of Piltel debt up to a maximum of $20 million;

* Dollar-denominated Smart debt at the rate of $0.525 per $1 of existing Piltel debt. The new debt will mature in December 2007 and pay interest at Libor plus 100 basis points;

* Dollar-denominated Smart debt at the rate of $0.575 per $1 of existing Piltel debt. The new debt will mature in December 2008 and pay interest at Libor plus 100 basis points;

* Dollar-denominated Smart debt at the rate of $1 per $1 equivalent of existing Piltel debt. The new debt will mature in June 2014 and pay interest at 2.25%;

* For yen trade creditors, dollar-denominated Smart debt at the rate of $1 per $1 equivalent of existing Piltel debt. The new debt will mature in June 2014 and pay interest at 2.25% and will include a put option exercisable with 15 months' notice at 52.5% in December 2007 and 57.5% in December 2008;

* Dollar-denominated debt guaranteed by the Republic of the Philippines at the rate of $1 per $1. The new debt will have a 12-year maturity and a 2% coupon. Bondholders will not qualify for this option.

Smart, a cellular telephone company, said the proposed transaction will allow Philippine Long Distance Telephone to rationalize its wireless business segment. Smart will gain full access to Talk 'N Text's expanding subscriber base and improving revenue streams. Philippine Long Distance's wireless group is expected to benefit from the closer operational alignment of Smart and Piltel, an increase in the share in Piltel's revenue streams and certain other cash and tax savings.

Negatives will be increased interest expense and foreign exchange exposure from the issuance of new Smart debt.

Smart said it is in the process of obtaining the necessary consent and waivers from its financial creditors and guarantors of its debt to enable it to complete the offer.

Subject to a successful debt offer, Smart also intends to request consents from its financial creditors and guarantors of its debts to allow it to acquire Philippine Long Distance's interests in Piltel consisting of 767 million common shares or 45.3% of Piltel's outstanding shares and 59 million series K convertible preferred shares, convertible into Piltel common shares at a ratio of 170:1.

The offer is subject to at least 75% of Piltel's existing debt being tendered including all of the yen trade facility, 67% of the peso and U.S. dollar facility agreements, $65 million face value of Piltel's conversion note bonds, 67% U.S. dollar trade facilities and 50.01% principal amount of the term notes facility agreement.

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