IN a last-ditch attempt to compel Express Telecommunications Co. (Extelcom) to partner with Bayan Telecommunications Inc., the Lopez-controlled phone firm is now asking the Supreme Court to refer its case to the court en banc after losing out before the appellate court.

“As the last bastion of justice and equity, petitioners have not abandoned their belief that the members of the High Court are imbued with the noblest of intentions in interpreting and applying the germane provisions of the Constitution law, and jurisprudence…Petitioners, therefore, seek the equitable hand of the Honorable Court en banc in view of the attendant novel constitutional and legal issues presented,” said Bayan and Marifil Holdings Corp. (MHC).

Bayan is a creditor of Extelcom while MHC is a shareholder of Extelcom.

The two companies are asking the SC to issue a temporary restraining order (TRO) against the implementation of Extelcom’s rehabilitation plan; issue a preliminary injunction so that Extelcom, its rehabilitation receiver, and creditor-turned-shareholder Trans Digital Excel (TDE) Inc. are prohibited from implementing the said orders; and reverse the appellate court’s December 2009 order.

Bayan said the Court of Appeals erred in its decision when it ruled in favor of TDE. It stressed that its alternative rehabilitation plan is far more advantageous than the approved rehab plan of TDE. “For the rehab court to refuse to even consider the alteration of a flawed rehab plan is clearly a grave abuse of discretion on its part that necessitates the equitable intervention of the honorable court.”

Bayan, a creditor of Extelcom, proposed that the two firms enter into a commercial agreement whereby Extelcom shall allow Bayan to use its frequency in the 800megahertz in exchange for a share of Bayan’s revenues derived from its wireless local loop (WLL) business and revenues from roaming service using code division multiple access (CDMA)-based cellular phone service.

“Bayan is seen as a potential partner of Extelcom in relaunching the latter’s wireless business under the CDMA or wideband-CDMA platform,” it said.

Bayan said the share in Bayan’s WLL revenues and a 50-percent share of Bayan’s Ebitda (earnings before interest, tax, depreciation and amortization) from a CDMA roaming service will result in Extelcom’s ability to service a certain level of debt.

Based on conservative calculations, Extelcom could support sustainable debt of P1 billion at a concessional interest rate of 3 percent.

Bayan also proposed to reverse the P3-billion writeoff of accrued interest expense and penalties payable to TDE. After the reversal, Bayan said Extelcom’s total debt would have decreased to P6.2 billion from P9.2 billion.

“The P1 billion of sustainable debt will be allocated to the P2.6-billion lia-bility of Extelcom to banks and trade creditors. Of the remaining P1.6 billion, P0.6 billion shall be converted into capital stock, which will result in a 23.1-percent ownership in Extelcom, while P1 billion will be treated as unsustainable debt, subordinated to the sustainable dent and serviced from excess cash flows,” said Bayan.

The company said the P3.1 billion in loans payable to TDE and P376 million advances to TDE will be restricted as debt that can be serviced from excess cash flows after full servicing of both the sustainable and unsustainable debts.

On the other hand, TDE’s approved rehab plan calls for the reduction of the par value of the 200 million shares from P10 to P1.80 each and the conversion of Extelcom’s financial liabilities amounting to P8.9 billion—except government liabilities of P191 million—into 911,111,111 common shares with a par value of P1.80. This will result in financial creditors owning 82 percent and existing shareholders holding 18 percent of Extelcom.

TDE plans to re launch Extelcom’s cellular business via a partnership with Eastern Telecommunications Philippines Inc.

But the court-approved rehab plan resulted in the dilution of MHC’s shareholdings to only 8.39 percent from 46.62 percent.

“As a consequence of this premeditated and clandestine scheme for selfish commercial gain, MHC ended up having its shareholdings in Extelcom severely diluted to merely 8.39 percent. In the same manner, Bayan was never notified of the rehabilitation proceedings, and was unable to exercise its right as creditor to be informed,” said Bayan and MHC.

They both stressed that the consent of Extelcom shareholders was never obtained prior to the approval of the decrease and increase of the cellular firm’s capital stock, which, according to Bayan, includes a radical change in equity structure and, consequently, the amendment of its articles of incorporation. 

“Neither TDE nor the rehab receiver informed or consulted Bayan and MHC. Similarly, the rehab court never notified Bayan and MHC regarding the foregoing change in equity,” they added.

Bayan and MHC vowed to continue to fight the hostile takeover of Extelcom by pursuing all legal remedies to reverse the illegal dilution of its shares in the telecommunications company.