MANILA, Philippines — The Securities and Exchange Commission (SEC) is paving the way for the creation of investment vehicles that would buy or invest in corporate debt papers of large and medium enterprises.
This is part of government efforts to help companies cope with the coronavirus disease 2019 or COVID-19 pandemic.
Under the plan, investment companies will buy or invest in corporate debt papers of large and medium enterprises.
With this, SEC hopes to help avert credit and liquidity crises that may arise from the economic downturn caused by COVID-19, SEC chairperson Emilio Aquino said.
“This is to support the recovery of businesses and the overall economy,” Aquino said.
The SEC on July 8 released for public comment the draft rules providing the minimum requirements and guidelines in the creation and operation of such investment companies called Corporate Debt Funds (CDFs).
“The new investment vehicle called Corporate Debt Fund will be particularly helpful in providing for the liquidity needs of large- and medium-sized corporations for repayments, emergency spending and investments necessary to sustain their operations and preserve jobs in these challenging times,” Aquino said.
A CDF offers for sale a fixed number of non-redeemable units of participation or shares with the goal of investing in the portfolios of corporate debt papers of large corporations and medium-sized enterprises operating or deriving income in the Philippines.
To incorporate, the CDF shall have a minimum subscribed and paid up capital of P50 million.
“But as an exception, the subscribed and paid up capital shall not be lower than P1 million if the CDF forms part of a group of investment companies to be created or already in existence to be managed or under management by the same fund manager with a track record of at least five years,” the SEC said in its draft circular.
The CDF may offer the securities to qualified buyers.
These buyers may be banks, pension funds, insurance companies and registered investment houses under private placements during a 12-month period.
The CDF shall invest the proceeds from the issuance of securities in corporate debts such as bonds and promissory notes of large corporations and medium-sized enterprises. However, it may also invest in deposits and money market instruments pending the deployment of the proceeds in accordance with its investment objectives, the SEC also said.
As a precaution against risks, investments in corporate debt issued by a single enterprise must not exceed 25 percent of the net asset value of the CDF and 50 percent in the case of single group entities.
The limit shall be computed based on the total proceeds of the securities sold within the initial offering period, SEC said.