Landbank head admits using firm to buy MRTC shares
MANILA, Philippines–The head of the Land Bank of the Philippines (LBP) has admitted using a company being linked to businessman Roberto V. Ongpin to buy shares from the Metro Rail Transit Corp (MRTC).
Testifying before the joint hearing of the Senate blue ribbon committee and the committee on banks on Tuesday, LBP president and chief executive officer Gilda Pico said they had to grant a loan to Global Air Services (GAS) because the bank could not buy it directly pending the approval by the Bangko Sentral ng Pilipinas (BSP).
Pico said GAS is 100 percent owned by a certain Presidio Capital, one of the sellers of the MRTC shares.
“Why did you give a loan to GAS when you could just have bought it straight from the shareholders or the bond holders of MRTC?” asked Senator Ralph Recto.
“As I was explaining earlier Mr. Chairman, this was really an option because at that time there was an urgency to buy the shares because of the notice of arbitration filed by MRTC on December 4, 2008,” Pico said.
“Because we have not yet received the clarification from the BSP whether we can buy the MRTC shares without the monetary board approval or not. So pending this, an option is to give a loan to GAS …” she further said.
“So you had to go through someone else to buy the bonds from other bond holders?” asked Recto.
Even Senate Presidet Juan Ponce-Enrile also wondered why the government specifically granted the loan to GAS.
“Why GAS?” asked Enrile.
“Well, GAS was given by one of the sellers, Presidio,” said the LBP chief.
Former Finance Secretary Margarito Teves, who also testified in the Senate, said he gave the instruction to the LBP and DBP to start the acquisition of MRTC shares in October 2008 because of the “threat of arbitration” from the MRTC.
“DOF believes that the GFIs (government financial institutions) would be in the best position to acquire MRT interests because the national government at that time was closely watching its fiscal position amid the global financial crisis,” Teves said.
He also cited the notices of arbitration sent by the MRTC, which he said was of “utmost concern” to the government because it might lead to a downgrade of the country’s credit rating, possible shut down of MRT system, and possible payment of claims to MRTC amounting to approximately 2.5 billion dollars related to the arbitration.
The acquisition of MRT shares, Teves said, resulted in the withdrawal of arbitration cases against the government.
He said the government also obtained 11 out 15 MRTC board seats after the acquisition.
