WHY GOV’T ALWAYS SUFFERS
It turned out that the Special Purpose Vehicle (SPV) Law, which has the good intention of relieving businesses of their debt load following the Asian financial crisis, was exploited by the Lopez group to realize a savings of P250 million to P417 million at the expense of the Development Bank of the Philippines (DBP).
A chart provided by presidential spokesperson Harry Roque showed the possible culpability of officials of the state-owned DBP in what was otherwise a legal transaction.
For the P1.667 billion in Lopez company debts to be sold to an SPV company, these should be declared as non-performing loans (NPL). The information gathered by the Palace indicated that the Lopez group was liquid enough to repay its obligations to the government before these were disposed by DBP.
Republic Act 9812, or the SPV Act of 2002, allowed banks to unload nonperforming assets to an asset management company to improve their financial strength.
Sold to Lehman were P592 million from the Lopez’s failed telecoms venture Bayan Telecommunications Inc.; P207 million from cable TV business Central CATV Inc. for a loan approved in 1997 and became past due in 2001; and a P158 million loan from Benpres Holdings, which was obtained in 1996 and became past due in 2002. Benpres stopped paying amortizations in May 2002.
Based on the Palace chart, however, DBP lumpedtheLopezdebtsamongNPLsoldtoLehman Brothers Asian Investment Ltd. that allowed up to P417 million in savings for the conglomerate.
Lehman can’t place an exact figure on the Lopez debts since these were part of a total P9.5 billion package it bought from the state bank through the SPV law.
In turn, DBP incurred a loss of possibly nearly P1 billion since, Roque said, a Lehman official gave an estimate of P668 million to P1.069 billion on the amount it paid particularly for the Lopez debts.
Lehman in turn collected from the Lopezes P1.25 billion to P1.4 billion. After the sale of the soured debts, it is up for the SPV company to collect.
It is, thus, the process at which the NPL were determined that triggered the eventual disadvantage to government in the deal.
Since Lehman was able to easily collect from the Lopez group, DBP, with all the power of government behind it, should have not fared less.
Roque said such a misdeal was what had lighted up Mr. Duterte’s temper and the desire to run after oligarchs who have twisted government’s hands into giving them favors.
The President said he will not allow the operations of the Lopez jewel ABS-CBN Network even if it gets a fresh franchise from Congress unless the Lopez group returns what it unfairly gained from the government.
Mr. Duterte, in his televised address recently, asked the Office of the Ombudsman to investigate the DBP transactions. The House of Representatives also plans to resume a shelved probe on the dealings.
Roque raised the loophole in the law, in which a company that is not bankrupt managed to sell the loans to an SPV at a low price and bought back the assets at a lower price, which may recur among state-owned financial institutions.
Resolving such a defect would be crucial since a similar scheme is provided under the Financial Institutions Strategic Transfer bill pending in Congress.
DBP insisted that the transaction was legal, and so it was, but the discretion in deciding that the more than P1 billion that Lopez owed was hard to collect was clearly a favor granted the influential oligarch.
“DBP insisted that the transaction was legal… but the discretion in deciding that the more than P1 billion that Lopez owed was hard to collect was clearly a favor granted the influential oligarch.
“Roque said such a misdeal was what had lighted up Mr. Duterte’s temper and the desire to run after oligarchs who have twisted government’s hands into giving them favors.