Despite being legal, GMA to remove foreign investors from network

Ian Nicolas Cigaral - Philstar.com
Despite being legal, GMA to remove foreign investors from network
PDRs are financial instruments allowing foreigners to invest in a Filipino company without owning any part of it. Both ABS-CBN and GMA offer this type of security.
abscbn.com / gmanetwork.com

MANILA, Philippines — Ahead of a potential Lower House probe on a completely legal investment instrument, GMA Network Inc. moved on Tuesday to dislodge foreign investors from the broadcaster as a “measure of protection of investments held by non-Filipinos.”

In a disclosure to the local bourse, the network said its board of directors approved to buy back Philippine Deposit Receipts (PDRs) held by existing foreign investors in the company until October 31 this year. 

Once acquired, PDRs will be converted by GMA Network into common shares.

PDRs are financial instruments allowing foreigners to invest and earn in a local firm without actually owning and gaining control of the company. A valid investment outlet approved by the Securities and Exchange Commission (SEC), PDRs became useful avenues for foreign investments in sectors which the Constitution limits to Filipino ownership, like mass media.

But lawmakers allied with President Rodrigo Duterte made a fuzz out of PDRs during hearings for a new franchise for ABS-CBN Corp., which eventually was not granted, partially on the grounds that legislators view PDR as illegal— despite SEC repeatedly saying they are not. At the time, GMA issued a statement that said the company “maintains the legality” of its PDRs.

The inquiry on PDR apparently does not stop with ABS-CBN that upon the opening of new session last month, Nueva Ecija Rep. Micaela Viologo is seeking a House probe into all PDRs issue to broadcast companies “in the interest of equity, equality and fairness...” 

GMA’s decision to buy back its PDRs appears to be in preparation for that investigation. ABS-CBN, meanwhile, continues to hold into its PDRs. The House probe is yet to be calendared.

"What happened to ABS in general will discourage companies from issuing PDRs. The impact of removing PDRs will depend on the company," April Lee Tan, research head at COL Financial, said in a text message.

"If they [companies] are cash richor have other potential local investors, then it's okay. Otherwise, they will have a difficult time removing PDRs," she explained.

PDRs go a way back. Reeling from the financial collapse brought by the Asian financial crisis, Lopez-led ABS-CBN first sold PDRs in 1999 to raise capital. In 2007, GMA Network followed suit and offered 822.115 million PDRs, 70% of which were allotted to foreign investors.

PDRs held by foreigners will be bought back by GMA at P4.55 per share “or lower,” cheaper than the instruments were first offered for P8.50 per share in 2007. 

Trading of GMA Network and GMA Holdings stocks were suspended for an hour on Tuesday morning to give investors time to digest the announcement. 

At the end of the session, shares in GMA Network fell 0.40% to P4.99 each, while GMA Holdings was up 0.22% to P4.56 apiece.

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