Best Working Capital Management Solution Highly Commended: PLDT Group

Published: Apr 2021


Photo of Leo Posadas, PLDT Group.

Leo Posadas


PLDT is the Philippines’ largest and only integrated telecommunications company. Through its principal business groups – fixed line, wireless and others – PLDT offers a wide range of telecommunications and digital services across the Philippines’ most extensive fibre optic backbone, and fixed line and cellular networks.

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Balance sheet neutral solution for Philippine buyer and Singapore seller

The challenge

As part of its working capital management plans, PLDT was looking for financing solutions that would allow it to extend payment terms with its key suppliers. At the same time, a long-standing client of DBS wanted to sell its invoices and receivables arising from its sales to PLDT to DBS in order to enhance its working capital management.

The solution

PLDT implemented a solution which provides its key suppliers the option to be paid earlier while maximising its extended payment terms. There was no adverse impact on either company’s balance sheets. PLDT worked with its bank to establish a bespoke supply chain finance (SCF) solution to process payments in line with its requirement, while meeting the other company’s requirement of receiving early payments with minimal documentary requirements.

Best practice and innovation

The solution creates value for anchor buyers and sellers throughout the technology supply chain. Traditionally, banks and anchor buyers collaborate to invite suppliers to be onboarded for a SCF programme. However, with this specific programme for PLDT, it was a reverse marketing collaboration between its bank and the supplier (Company X) to pitch potential anchor buyers to initiate a SCF programme.

Through its long-standing relationship with Company X, the bank was able to track its sales to several other companies, many of which did not have any SCF solutions in place and, as a result, would not benefit from opportunities to enhance their working capital.

Once the bank had consulted with Company X, PLDT was identified as a potential anchor buyer which could benefit from such a SCF programme.

The bank could have unilaterally entered into a receivables factoring programme with Company X to finance its sales to PLDT, but decided to take the opportunity to expand its relationship with a new counterparty by looking at financing a supply chain from the other party’s point of view.

Legal documentation achieves balance sheet neutrality for both the anchor buyer and the seller and PLDT. Company X and the bank collaborated to create a legal structure that would retain existing treatments on both the anchor buyer’s and the supplier’s balance sheets.

This structure avoided any downside impact to working capital ratios for all parties.

Key benefits

  • Provided seller with the flexibility to receive payments early, while increasing the purchasing capacity for PLDT to buy more from that company.
  • A quick and scalable supplier onboarding process, with no documentation signed between DBS and suppliers, which enabled quick and efficient programme implementation.

“Our solution is unique in both its scope and concept. As this was a cross-border financing deal involving ourselves and a Singapore supplier, the bank worked with external counsel to incorporate special legal concepts to achieve the balance sheet neutrality required by all parties. Moreover, this programme defies traditional concepts in the way it is originated and structured. It demonstrates the flexibility of a supply chain finance programme that can easily be integrated for both a buyer and a seller, to achieve the necessary financing and working capital objectives,” says Leo Posadas, Treasurer.

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Jason Songyi Zhou

Senior Vice President, Regional Sales, Global Transaction Services
DBS Bank Ltd

As this was the first cross-border Supply Chain Program for PLDT as an Anchor Buyer, we partnered them closely at every step of the deal; from ideation, solutioning, addressing potential legal and accounting considerations, to implementing the agreed solution smoothly within a tight year-end timeline.

We were also the bridge between PLDT and its key supplier, to ensure this Supply Chain solution would meet the objectives of both parties: (a) For PLDT – extending it payment terms on balance-sheet neutral basis, and (b) for the Supplier – the ability to receive early payment on a very documentation-light basis.

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