MANILA, Philippines — The issuance of Philippine Depositary Receipts (PDRs) by media networks such as that of ABS-CBN does not violate the constitutional requirement that mass media companies should be 100 percent owned and managed by Filipinos.
This was the contention of Albay Rep. Edcel Lagman Thursday as the House of Representatives resumes its deliberations on the broadcast network’s issuance of PDRs, which is one of the issues raised against the media giant amid its bid for a 25-year franchise.
A PDR is a document that gives its holder, in consideration for the payment of a certain price, the right to “own” stocks of a company and to receive their dividends or interest. In spite of that right, however, title over the stocks remains with the company.
According to Lagman, PDR holders do not enjoy voting rights and full beneficial ownership thus, “they do not dilute the 100% ownership and management of mass media.”
The lawmaker explained that PDR holders are only entitled to “receive dividends accruing to the underlying shares after operating costs and other expenses are deducted from the profits.”
PDR holders are also given the option to convert the underlying shares to shares of stock, if qualified as a Filipino.
“The issuer of the PDRs retains the voting rights since PDRs are mere instruments of investment, not evidence of corporate ownership,” Lagman said in a statement.
In defending ABS-CBN, Lagman explained that ABS-CBN Holdings Corporation was able to secure authority to offer PDRs from the Securities and Exchange Commission (SEC) in 1999 and in 2014.
The said PDR certification, Lagman said, states that: “The PDR represented by this Certificate does NOT represent shares of stock but only confers a right to delivery or sale of existing shares of stock of ABS-CBN Corporation owned by the Issuer (ABS-CBN Holdings Corporation) under the terms and conditions stated herein and in the PDR instrument”.
Further, Lagman said the PDR instrument also explicitly provides that: “Neither the Security Agent nor the Holder shall have voting rights with respect to the shares.”
Lagman said that the PDR certification likewise states that “if the person to whom the shares are to be delivered upon the exercise of a PDR is not a person (not a Filipino) to whom delivery of shares is permitted under Philippine Law”, the share shall be sold in the “open market” and the net proceeds of the sale delivered to the ineligible PDR holder.
Even other corporations where there is a requirement of at least 60% Filipino ownership—such as the Philippine Long Distance Telephone Company (PLDT)—are also entitled to issue PDRs, said Lagman.
He said that PLDT used this practice in 1988 when it was then known as “Global Depository Receipts” or “American Depository Receipts”.
In an earlier House hearing, ABS-CBN president and chief executive officer Carlo Katigbak said that even their rival network GMA-7 has done such practice in the past.
“Unang una po, sa simpleng lenggwahe lang, ang PDR ay hindi isang share or pag mamay-ari sa ABS-CBN. Malinaw po ito kasi ang humahawak ng PDR ay hindi nakakaboto sa kahit anumang bagay sa pamamalakad ng ABS-CBN,” he said.
(First of all, in simple language, PDR is not equivalent to a share or ownership of ABS-CBN. It is clear because PDR holders cannot vote on anything with regard to the management of ABS-CBN.)