Can Purisima untangle the Landbank mess?


Atty. Dodo Dulay
WITH the Aquino administration recently bagging its second investment-grade rating, this time from New York-based Standard & Poor’s, the challenge now facing our economic managers is to keep the Philippines on a positive growth path.

A key factor in sustaining, if not improving, the country’s growth is to lower its debt-to-GDP ratio. Last year, the country’s national government (NG) debt stood at P5.8 trillion, the equivalent of some 48 percent of GDP.

But with Malacañang’s plan to increase government spending in 2013, particularly on high-impact infrastructure projects, the country’s NG debt is more likely to increase rather than decrease unless the Aquino administration cam generate more revenue.

Perhaps this is why Finance Secretary Cesar Purisima has been pushing the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC)— the two main revenue generating agencies under his department—to improve collection.

But Purisima need not look so far for additional government revenue source. There’s one right up his alley: Land Bank of the Philippines (Landbank), where he sits as chairman of the Board.

We’re talking about the 46,596,596 Meralco shares held by Landbank, which at the current market price of P388 per share, are now worth some P18 billion.

That is, if Purisima can first untangle the mess at that state-owned bank.

That’s because in December 2008, during the Arroyo administration, Landbank sold the Meralco shares for P4.19 billion or at P90 apiece to Global 5000 Investment Inc., a subsidiary of San Miguel Corporation (SMC), which has since been renamed to San Miguel Global Power Holdings Inc.

Under the Share Purchase Agreement (SPA) entered into by (then and still) Landbank President Gilda Pico with San Miguel Global, the SMC subsidiary would make a down payment of P838.7 million and pay the balance of around P3.35 billion in three annual installments: P838.7 million on January 31, 2010 (curiously, more than a year after the SPA was executed); P838.7 million on January 31, 2011; and P1.677 billion on January 31, 2012.

Aside from the easy payment terms, what appears quite dubious about the SPA is the provisions on the transfer of voting and other proprietary rights over the Meralco shares to San Miguel Global.

Section 3(a) of the SPA provides that upon receipt by Landbank of the P838.7 million down payment from San Miguel Global, any and all stock dividends and other benefits, declared by Meralco on the 46,596,596 shares will go to San Miguel Global. If the dividend is given out in cash, it will also go to San Miguel Global, but it will be applied to the payment of its remaining balance to Landbank.

Moreover, in Section 3(b) of the SPA, the voting rights to the Meralco shares will likewise be transferred to San Miguel Global upon payment of the P838.7 million down payment to Landbank, including the right to nominate and elect members to Meralco’s board of directors.

In other words, by paying a mere 20 percent of the purchase price, San Miguel Global immediately gets to exercise and enjoy all shareholder rights and benefits to the entire 46,596,596 Meralco shares!

And if cash dividends are declared by Meralco, San Miguel Global need not even pull out money from its own pocket because part of its remaining balance will already be paid for by the dividends. In short, San Miguel Global’s obligation is also ‘self-liquidating.’ Ang galing!

That’s not all.

In addition, the SPA provides that if San Miguel Global defaults on the payment of the first or second installment when due, it has a ‘grace period’ of another twelve (12) months within which to pay the defaulted amount (or the so-called ‘extended installment amount’). With this provision, Landbank also effectively extended San Miguel’s installment period to more than five years counting from the date of the SPA’s execution in December 2008.

With its abnormally favorable and very attractive terms and conditions, it’s no wonder many pundits are calling this transaction a ‘sweetheart deal’.

In a press statement, however, Landbank claims “the transaction did not materialize due to the unlawful cancellation by [DARAB] Adjudicator Miñas of Landbank’s share in Meralco. The Shares Purchase Agreement therefore was not at all implemented in 2008 and even now.”

If that’s the case, then Puri­sima should, as Landbank chairman, formally cancel the SPA with San Miguel Global in order to finally erase all the legal effects of the transaction and “clean” the Meralco shares of any controversy. The 46,596,596 Meralco shares can then be sold at public auction to raise additional revenue that the Aquino administration badly needs to keep government debt in check.

Question is: Does Purisima have the mojo to set things right at Landbank?


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