ABS-CBN PDRs 'compliant' with law, as SEC says ownership rules evolving

ABS-CBN News

Posted at Feb 24 2020 03:29 PM | Updated as of Feb 25 2020 12:25 AM

ABS-CBN President and CEO Carlo L. Katigbak appears during a senate hearing on the company's franchise renewal on February 24, 2020. Jonathan Cellona, ABS-CBN News

MANILA – ABS-CBN Corp President and CEO Carlo Katigbak on Monday told a Senate hearing on the network's franchise that at the time of issuance, its holding firm's Philippine Depository Receipts complied with existing laws.

If the rules on PDRs changed since ABS-CBN Holdings Corp issued the first ones in 1999, it should be allowed to "rectify" the investment instruments to reflect the changing regulations, ABS-CBN president and CEO Carlo L. Katigbak said. 

Solicitor General Jose Calida sought to void ABS-CBN's franchise citing among others, ABS-CBN Holdings' PDRs, which he said violated a constitutional restriction on foreign ownership of media. Investment instruments like PDRs give foreigners the right to earn dividends without ownership of a company.

"I would agree with the statements that have been made, if the rules and regulations have changed, then we should be given the opportunity to rectify along with those changes," Katigbak said. 

"But at the point that these was offered, it was compliant," he said.

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When they were issued in 1999, ABS-CBN Holdings' PDR holders "are not owners of the underlying corporation," said Securities and Exchange Commission supervising commissioner Ephyro Luis Amatong.

The test to determine foreign holdings in a Filipino company, however, are evolving, he said, citing a Supreme Court decision on PLDT Inc, which said voting rights determine ownership.

"The challenge here is the test to determine ownership is evolving in the Supreme Court, what we can say is that when the PDRs of ABS-CBN Holdings Corp, when they were issued based on prevailing law, jurisprudence and regulations, the determination of the SEC at that time is there's no transfer of ownership. Holders of the PDRs are not owners of the underlying corporation," Amatong said.

"We haven't had the opportunity to investigate whether or not the implementation of ABS-CBN applying current law and jurisprudence will in fact be still aligned with the Constitution," he said.

Owning PDRs allows holders to receive dividends and the right to convert it to common shares if qualified, former PSE president and ACCRA Law senior partner Francis Lim earlier said. Holders of PDRs do not have voting rights, he said. 

"It's like buying a ticket in order to bet on a horse. You don't own the horse, but if that horse wins, you have a share in the winnings," Lim told ANC.

ABS-CBN earlier said the PDRs issued by its holding company were "evaluated and approved" by the SEC.


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