Biz Buzz: Open season
At any day now, the Bankers Association of the Philippines (BAP), which controls about 24 percent of the Philippine Dealing System Holdings (PDS Group), expects to receive a formal offer from the state-owned Land Bank of the Philippines to buy out its block of shares. An offer of intent had been previously sent but there were certain minor corrections needed for the offer to be made official and elevated to the BAP’s board. “It’s not a question of if, but when,” a source from BAP said.
Any buyer will of course require a due-diligence audit on whatever it’s buying, which means that Landbank and BAP will have to agree on a timeframe for which Landbank could scrutinize the books, the same exclusivity period that lapsed for the Philippine Stock Exchange (after several extension) on March 31. And Landbank will have to talk to each of the other PDS shareholders aside from BAP.
On the issue of certain business being taken out of PDS—which another PDS shareholder, SGX, isn’t happy about—particularly the foreign exchange trading system that had migrated to Bloomberg three weeks ago, the BAP source explained that the agreement with PDS expired in January 2017 and had been extended several times as bankers awaited the PDS’ new proposal. But at that time, PDS was already busy working on integration initiatives with the PSE and could not fulfill the requirements, thus, BAP had to seek other service providers, eventually picking Bloomberg, the source explained.
“We’re happy how the transition was managed,” the BAP source said, noting that the three-year service agreement with Bloomberg could no longer be revoked despite objections from SGX. From their perspective, it’s an issue that SGX should have taken up with the management of PDS, which was given the first crack before BAP turned to other service providers.
In any case, the status quo is unsettling for the banking industry. There’s concern that the PDS organization will lose more people as these technocrats will of course seek stability. “If PSE is still interested, let’s put a plan. If Landbank really has an offer, let’s come up with a plan. We can’t forever keep the uncertainty,” the BAP source said.
For its part, the PSE keeps a flicker of hope that the PDS takeover may still happen despite all odds—and despite having ruled out any bidding war against LandBank. The PSE said it remained “committed to its vision to unify the fixed-income exchange and equities markets and enable all stakeholders to reap the accruing benefits of integrated capital market.” —DORIS DUMLAO-ABADILLA
Carving out GS trading
If there’s one industry that has much to lose now that the future of the PDS is uncertain, it’s the bank treasurers/government securities (GS) dealers who have long loathed the migration of GS trading to Philippine Dealing and Exchange Corp. (PDEx).
The legality of the GS trading system under PDEx has been questioned before the Supreme Court but because court resolution takes a long time, the PDS takeover by the PSE would have given banks a chance to go back to the over- the-counter (OTC) system outside PDEx (where GS trading is likewise OTC but with some mapping out system that allows price discovery).
Last Friday, a group of bankers met with former lawmaker Luis Villafuerte
Sr.— part of the group that petitioned against PDEx and financial regulators ( who required the much-ballyhooed GS trading system)—to discuss the implication of the court case if the government were to end up owning PDS (through Landbank). To recall, PSE had agreed to carve out GS trading from the PDS deal. What happens if a new suitor, Landbank, ends up marrying PDS?
“I told them that our conditions have nothing to do with Landbank or PSE. What they did with PDEx was they were licensed to engage in both exchange and OTC operation, which cannot be done under the law because exchange trading is done through brokers while dealing in GS is different. You can’t operate both the exchange and OTC because there are internal conflicts of interest there,” Villafuerte told Biz Buzz in a phone interview.
The GS trading platform run by PDEx is not a real exchange but an OTC market “under the guise of a mapping-out” system, Villafuerte claimed.
Whether it’s PSE or Landbank taking over, or even assuming that no new party is coming in, Villafuerte said the case was already in court and this would be withdrawn only if all parties would agree to scrap the “objectionable” features of GS trading and carve this out of the PDEx platform.
When the parties thought that PSE would take over PDS, a compromise settlement had been in the works to carve out GS trading from PDEx. But now that the PSE’s takeover bid had been scuttled, either the court case will run its course or whoever will control PDS will continue efforts to address the issues raised by Villafuerte’s group.
Apart from questioning PDEx, Villafuerte also insisted that GS trading be restored to the auspices of the Bureau of Treasury’s Registry of Scriptless Securities (RoSS). Since the secondary trading of GS has become scripless—it’s just debit and credit transaction at the Bureau of Treasury—Villafuerte argued that a private corporation (referring to the creation of Philippine Deposit and Trust Corp.) should not take custody and collect fees when no physical asset had been issued.
“If there’s no buyer and it’s still under the original (shareholders), this case will continue until the matter of the removal of GS OTC is made and until RoSS is restored to the DOF (Department of Finance) from a private company,” Villafuerte said.
For those who are wondering why Villafuerte is so wellversed and passionate about this issue, long before he became a politician, this guy was a top investment banker and capital market practitioner. Banking old-timers remember him as a cofounder of the Money Market Association of the Philippines.
The BAP, for its part, agrees with the course of action proposed by Villafuerte. —DORIS DUMLAO-ABADILLA Crackdown Energy Secretary Alfonso Cusi is unhappy about the failure of some distribution utilities to fulfill their mandate of bringing electricity to the farthest corners of the country.
Indeed, in this day and age, having a steady supply of electricity is a key element to help Filipinos raise their standards of living. More than just powering household appliances, electricity helps people keep their electronic devices running.
And fully charged laptops and cellphones mean farmers and fishermen in even the most remote barangay have access to information that could help improve their lives.
Biz Buzz hears, however, that even the bigger distribution utilities serving large provinces are behind on their electrification targets.
As such, we hear that the energy chief is getting ready to crack the whip on these erring firms, many of which are large corporations in their own right, or owned and controlled by influential personalities.
How? Cusi is said to be preparing a new policy that will order a performance audit of distribution utilities nationwide. Not even the biggest, most well-connected ones, will be spared.
Also on the table in the event that some firms are found to be noncompliant—and we’re pretty sure that some big utilities are sleeping on the job in this regard—the energy chief is readying a slew of sanctions that can be imposed on the delinquent firms, from the lightest slap on the wrist to the heaviest license suspensions.
The goal, of course, is for the country to finally achieve that elusive 100-percent electrification level that energy officials have been promising all these years. Can Cusi do it? Distribution utilities who don’t want to spend too much money on “electrifying” missionary areas are probably hoping he’s not too serious about this plan. We’ll see. —DAXIM L. LUCAS
End of an era
Magazine aficionados will see fewer titles in the market as Summit Media bade adieu to the print editions of Cosmo, Pep, Topgear, FHM and Town and Country—the last six brands published by Summit Media which had yet to go fully digital. Until now, that is.
“As we embark on our new journey toward a wholly digital future, we look back at the values that made us successful, and one thing that stands out is our respect for our audiences,” Summit Media president Lisa
Gokongwei-Cheng said. “Our brands, each with its strong voice and well-defined identity, have resonated with our audiences because they stand for something, which is why for 23 years, Summit published the most successful and well-loved magazines in the country’s history.”
As Summit Media heeds consumers’ preference to consume content in digital form, the media outfit vowed to continue delivery of “quality, upto-the-minute content and a dynamic and engaging editorial experience—this time, aided by data, which now pervades and informs many of our editorial decisions. —DORIS DUMLAO-ABADILLA