PDR holders have no rights of ownership in ABS-CBN Broadcasting, legal counsel explains

MANILA, Philippines — Philippine Depositary Receipts (PDRs) holders do not have any rights of ownership or management in ABS-CBN Broadcasting Corp., the network’s counsel maintained Thursday.

During the joint hearing of the House committee on legislative franchises and the committee on good government and public accountability on ABS-CBN’s bid for a 25-year franchise, Atty. Cynthia Del Castillo explained the difference between ABS-CBN Holdings and ABS-CBN Broadcasting Corp.

According to Del Castillo, it is ABS-CBN Holdings that engages in the investment of shares while ABS-CBN Broadcasting Corp. is engaged in mass media.

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“In this case, the PDRs were issued by ABS-CBN Holdings to investors under the terms of what we call the PDR instrument. This is a contract between the investors of the PDRs and the issuer who is ABS-CBN Holdings,” Del Castillo explained.

“This contractual arrangement has nothing to do with ABS-CBN Broadcasting because ang parties ng kontratang ito (the parties in this contract) which is covered under the PDR instrument, are the investors and ABS-CBN Holdings,” she added.

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If there is any link between the PDR holders and ABS-CBN Broadcasting Corp., it is that PDR holders “track the performance of ABS-CBN Broadcasting” since the income of ABS-CBN Holdings come from the broadcasting company.

“In holding company, it only derives income through its ownership in other companies in the form of dividends and other distributions from its investments,” Del Castillo said.

“‘Yun lang po kasi kung mag-invest sila sa PDRs, they have to know kung anong value ng PDRs and that was dependent on the performance of underlying shares. Pero wala silang pakialam sa ABS-CBN Broadcasting,” she added.

(That is it because if they invest in PDRs, they have to know what the value of the PDRs are and that is dependent on the performance of underlying shares. But they have nothing to do with ABS-CBN Broadcasting.)

Del Castillo underscored that the rights of PDR holders are limited to ABS-CBN Holdings and not ABS-CBN Broadcasting Corp.

“Ang rights po ng PDR holders (The PDR holders’ rights) are only against ABS-CBN Holdings. And wala po silang (they have no rights) rights on ownership or management of mass media [corporation] which is ABS-CBN Broadcasting Corp.,” Del Castillo said.

Del Castillo said that when ABS-CBN Holdings issued PDRs back in 1999, that was the time when Asian countries were reeling from the effect of the Asian financial crisis of 1997.

“This (PDRs) was supposed to be very convenient and beneficial to most companies in the Philippines first for the reason that you don’t have to dispose of your ownership in order to raise financing,” Del Castillo said.

“In the same manner, it is beneficial—this is better than debt—because if it is debt then you have to pay the principal and interest regardless of the performance of the underlying shares or the shares used to secure your application,” she added.

Critics have previously said that the issuance of PDRs to foreigners is in violation of the Constitution which requires 100 percent ownership and management of mass media companies in the country.

But Albay 1st District Rep. Edcel Lagman said that PDRs do not dilute 100 percent Filipino ownership of mass media firms.

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Lagman explained that 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 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.