Makati Medical asks for better loan terms (BusinessWorld)

Published in the June 29, 2005 issue of BusinessWorld

Today’s Headline

BY JENNEE GRACE U. RUBRICO, Senior Reporter

Makati Medical asks for better loan terms

To restructure P1.2-B debt, invite new investors

The Makati Medical Center, among the most modern hospitals in the country, is now negotiating with creditors for the restructuring of about P1.2 billion in loans, hospital interim president Gabino A. Mendoza told BusinessWorld yesterday.

In an interview, he also confirmed that management was in talks with potential investors who could help the hospital pay its debts and improve its facilities and services.
"We’re looking at other possible fresh money coming in...There seems to be enough money out there that is eager to be invested in a hospital," he said, but he declined to identify interested investors.
Mr. Mendoza also confirmed that Philippine Long Distance Telephone Co. Chairman Manuel V. Pangilinan had accepted the hospital’s invitation to be an independent director.
"He accepted the post last Friday. He told us he wants to become an active director," the hospital president said.
Mr. Pangilinan was chosen because of "his expertise, judgment, and advice," Mr. Mendoza said. He also said the hospital could ask Mr. Pangilinan to invest as well.
"We really need the money," he said, but added that Mr. Pangilinan was not being pressured to help out.
When asked how much Makati Medical needed, Mr. Mendoza said it would be "okay" with an infusion of P200 million in new capital.
"This will help to alleviate the situation," he said, noting that hospital management was also hoping to get at least half of that or P100 million from hospital doctors themselves.
He also said any new capital would be used to retire old debts, to refurbish hospital facilities, and to buy new medical equipment. A portion of the money may also pay for a better information system, he said, and possibly for market research.
Hospital officials said Makati Medical Center incurred about P300 million in losses in the last three years, as shown by an audit by Joaquin Cunanan & Co., now known as Isla Lipana & Co.
The losses, incurred partly because of alleged mismanagement and partly because of allegedly inadequate information systems, were discovered by auditors in December 2004, hospital officials added.
Makati Medical Center has also tapped Development Bank of the Philippines (DBP) to be its adviser in restructuring the hospital’s loans, which went partly to the purchase of new medical equipment.
The state-run bank had lent P350 million to the hospital. Other creditors include Rizal Commercial Banking Corp., Insular Savings Bank, Social Security System, and DEG of Germany, which had lent euros equivalent to P300 million.
"DBP is trying to help us restructure our loans to make it manageable," Mr. Mendoza said.
He said that the hospital would want the loans’ due dates moved "as far back as possible."
But the hospital president also said the loan restructuring would not necessarily involve convincing creditors to convert their loans into equity.
He also clarified that the P1.2 billion did not include loans from nonbanks, which also ran up to hundreds of millions of pesos.
As part of the hospital’s financial rehabilitation, Makati Medical Center is reorganizing its board of directors and its management staff, Mr. Mendoza said, which started with the nomination of Mr. Pangi-linan to the board.
Hospital operations will also see some changes as departments are streamlined to cut on costs, he said.
But he also said a second retrenchment would have to wait until it becomes absolutely necessary. Last May, the hospital already retrenched 300 employees to cut on costs. It still has 1,600 employees.
Mr. Mendoza added that his hospital was hoping to break even this year, and to fully recover in two years to regain in five years’ time its post as one of the premier hospitals in Asia.