ABS-CBN Corp. assured lawmakers on Thursday that its issuance of Philippine Depositary Receipts (PDRs) is “above board” as evaluated by the government and market authorities.
“Their acts are all above board, they have relied on the approvals and the permits and licenses issued by the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE),” ABS-CBN legal counsel Cynthia Roxas-Del Castillo said during the hearing of the House committees on legislative franchises and good government and public accountability on Thursday.
“If for any reason, those decisions are wrong… we have po, in good faith, relied in them. So it’s going to cause some effect on the Philippine capital market dahil po it will erode the investor’s confidence in the decisions made by these government agencies and market regulation authority,” she added.
A PDR is a security that grants the holder the right to the delivery of sale of the underlying share, according to the PSE.
Ms. Roxas-Del Castillo said that PDRs are “purely financial instruments” which cannot be used to participate in the management of ABS-CBN.
“PDRs are purely financial instruments,” she said, adding that they are not shares that can be used to vote or participate in the broadcast company’s management.
The lawyer added that PDRs are not new since it was introduced in the Philippines right after the Asian financial crisis to offer financial relief.
Ms. Roxas-Del Castillo also said that ABS-CBN Holdings Corp. and ABS-CBN Broadcasting Corp. are different entities, saying that the former is a company incorporated to invest in shares while the latter is the company involved in mass media.
“Hindi po party sa PDR instrument ang ABS-CBN Broadcasting. Ang only link po, if you can call it a link, is that ang PDR investors po, when they invest in PDRs, they track the performance of ABS-CBN Broadcasting kasi dun po nanggagaling ang kita ng ABS-CBN Holdings,” she said.
Meanwhile, Anakalusagan Rep. and House committee on public accounts chair Michael T. Defensor said that ABS-CBN’s issuance of PDRs circumvents the Constitution in terms of mass media ownership.
While foreigners do not have their names on the shares of ABS-CBN Broadcasting Corp, Mr. Defensor said that PDRs allow them to own the same.
“There is an actual share in ABS-CBN Corp. They may not have their names, wala po sa pangalan nila yung ABS-CBN Corp. share, pero ang bawat PDR, ay may katumbas na share sa ABS-CBN Corp. ‘Yan po sa aking palagay is a circumvention of our Constitution on ownership. Sa maraming pagkakataon, yan po ay pwede nating sabihing na merong banyaga, meron siyang kinabitan na korporasyon na Pilipino, pero ang kita at pagmamay-ari, sa katotohanan, ay kanya ” he said.
Mr. Defensor also contested Ms. Roxas-Del Castillo’s statement that PDR investors cannot take part in the management of ABS-CBN Broadcasting Corp.
“Papasok po ako doon sa kontrata natin, yung Philippine Deposit Receipt Instrument. Ang sabi, ‘it will not alter, modify or otherwise change its Articles of Incorporation or By-Laws or take any other action so as to materially prejudice any rights in relations to the PDRs.’ Ito po ang tinatawag na negative covenant. Wala kang pwedeng gawin hangga’t kapit ko ang PDR,” he said.
Meanwhile, SEC Commissioner Ephyro Luis B. Amatong said that the commission was still waiting for the ruling of the Supreme Court on how to treat media companies that issued PDRs to foreigners.
“At this point, your honor, we do not look at derivatives like the PDRs. We await the ruling of the Supreme Court on what is the correct test and how we will treat those who have already issued PDRs, not just ABS-CBN, but GMA7 and any other media company that issued PDRs in favor of foreigners,” he said.
The two panels were discussing whether ABS-CBN violated the Constitution when it sold PDRs to foreigners which allegedly allowed non-Filipinos to own the network. The 1987 Constitution states that media companies should be 100% Filipino-owned. — Genshen L. Espedido
