IT’S LAUGHABLE how some pro-Duterte bloggers and trolls are actually doing more harm to the president than good, because as they lie through their teeth they will eventually be found out. Then who will suffer because of all the lies they propagate? Why, of course President Rodrigo Roa Duterte, to whom they ascribe the lies they fabricated to.
One of the things these pro-Duterte bloggers and trolls do is to get bits and pieces of truth and weave them to a whole lie to fit their narrative. Much like the way the movie Forrest Gump used real video clips of historic events and inserted Tom Hanks’ character into these, as if he was actually a participant of these events. But that was an entertaining move. This, on the other hand, is real life and the net effect is not entertaining at all.
It is even downright dangerous, both for the public and President Duterte.
Recent news had the issue of the Special Purpose Vehicle Law being raised by the Duterte trolls. Basically, their message is that this law – Republic Act 9182 – was created so that past administrations could write off behest loans of their respective cronies. This, they said, is hated by their Tatay Digong and thus part of his corruption crusade.
Nothing can be farther from the truth.
Gloria Macapagal Arroyo, former President and Speaker with staunch ally President Rodrigo Duterte and Carlos Dominguez III, a top official under PGMA, key Duterte campaigner and Finance Secretary under the current admin. Photo by Philstar taken during the Government Owned and Controlled Corporation Day, Malacañang, Aug. 15, 2018.
The SPV Act of 2002 or RA 9182 was passed in December 23, 2002 (Click here) was put together by the House of Representatives under Speaker Jose de Venecia and Senate President Franklin Drilon and signed into law by President Gloria Macapagal Arroyo.
The main purpose of the law was: “(a) To develop and maintain a sound financial sector for the country; (b) To address the non-performing asset problems of the financial sector; (c) To encourage private sector investments in non-performing assets; (d) To eliminate existing barriers in the acquisition of non-performing assets (e) To help in the rehabilitation of distressed business with the end in view of contributing to economic value added; and (f) To improve the liquidity of the financial system which can be harnessed to propel economic growth.”
In simple terms, the SPV Law was created to help companies with large volumes of non-performing assets act on and liquidate these assets – turn them into cash to use in more productive activities – quickly, without much red tape.
For example: Development Bank of the Philippines (DBP), Social Security System (SSS), Government Service Insurance System (GSIS) and PAGIBIG Fund had a lot of loans granted and properties in their hands that were not moving – either abandoned or just ignored by people who could not keep up with payments. Rather than sit on these non-performing assets the SPV law allowed them to liquidate these to companies with a lot of cash and created to buy these. So, the agency like DBP, SSS, GSIS or PAGIBIG would have the cash and the bulk buyer would then turn around and either rehabilitate these, operate them or wait until more favorable terms and resell them, as they had the cash to be more patient and efficient. Aka, mahaba ang pisi.
On a personal note, in those days I was running a strategic communications company serving the Presidential Advisor for International Competitiveness, Ambassador Roberto R. Romulo, and this SPV was one of the key financial reforms of PGMA. I recall having met with a number of foreign companies that expressed keen interest in investing in this area. One that stood out was the financial giant Cerberus (Click here) , which I recall now because of its unique branding and mighty financial power and expertise.
Anyway, now it seems Duterte trolls are trying to link the SPV Law to the so-called Lopez loans supposedly “written off” by the Development Bank of the Philippines (DBP). In their false narrative, the SPV was created by the government then to accommodate the Lopez Group and give it a free pass and simply forget about the loans.
This is so wrong in so many levels: First of all, the SPV Law was not created for write off the Lopez loans. It was created to provide relief for the whole Philippine financial system.
Second, The SPV Law was created by PGMA and her close allies in congress – De Venecia in the House and Drilon in the Senate (who at that time was still a political ally). It is inconceivable that the former President GMA – a most trusted political ally of President Duterte and trusted speaker of the last HOR under his administration – would be party to such an alleged sham deal that President Duterte would accuse her of such a corrupt practice and moves that were against the best interest of the citizenry. Last I heard, GMA and D30 are still pinky twins.
Third, it is no big secret in the political circles that GMA hates and has always hated Gabby Lopez’s guts (and the details of this is another story), and this has carried over with her undying support as she moved on to play a major role in the Duterte campaign and presidency. So why would she – during her presidency – cause the creation a law that would accommodate one of her worst enemies and give them a free pass worth billions of pesos?
So, what’s the truth? Yes, the SPV Law was used by the DBP to free itself from many loans it felt would give it a hard time weathering the financial storms of those days, including but not limited to the Lopez Group loans. But it isn’t as if The Lopezes took out the loan from DBP and just failed to pay for it and forgot about it altogether, leaving DBP holding the bag.
Philippine Star columnist Boo Chanco explained what happened quite well in his column of 03 September 2017 (Click here):
It started when former president Fidel V. Ramos asked the Lopezes to invest in public infrastructure projects. The Lopezes chose NLEX and one of the concession areas of MWSS which eventually became known as Maynilad. They also invested in putting up a pioneering national telecom backbone and in providing telephone service in Quezon City, the Bicol region and Eastern Visayas.
To help finance the projects, Lopez Holdings (then known as Benpres) borrowed from the financial market by issuing Long Term Commercial Papers (LTCP), which are essentially tradable corporate debt. Apparently, DBP was one of the financial institutions and private investors which bought the Lopez debt papers. Everything was fine and everyone was happy as interest was paid on the debt without fail.
Then came the Asian Financial Crisis. All of a sudden the exchange rate of around P25 to the dollar doubled to over P50 to the dollar. The Lopez Group borrowed from abroad and was also responsible for paying 90 percent of MWSS’s foreign debt.
Theoretically, the Lopez Group could recover foreign exchange losses in Maynilad over 25 years. But cash was needed for daily operations and the administration refused to grant early rate increase.
So the Lopez Group went into a debt default which affected debts not only to DBP, but to all creditors. To show goodwill, the Lopez Group paid some interest until formal debt restructuring talks could determine what happens next. There was also court supervised debt restructuring.
With the Asian crisis and the Lopez default, the value of its debt papers, including the LTCP went down. SPVs or Special Purpose Vehicles took advantage of the crisis. Some would refer to these SPVs as vulture funds because they thrive by buying distressed assets like the Lopez LTCP debt papers.
DBP held less than 10 percent of total outstanding in the Lopez LTCP. When investments failed as what happened here, all parties shared the pain, not just creditors. Lopez Holdings itself wrote it off, if I remember right, over P20 billion in equity and investments for Maynilad and Bayan Telecommunications alone.
Apparently DBP officials at that time were so panic-stricken that they sold their share of the Lopez LTCP to a vulture fund or SPV at a discount. This way, they might have thought, they could preserve what they could of the bank’s money. After all, they had earned interest on it already and could minimize potential losses by selling to the SPV.
But because they sold at a discount, they had to write off the balance from their books. Eventually, Lopez Holdings conducted a tender offer for its remaining unrestructured debt at 100 percent of the principal amount. At the time of the tender offer, DBP was no longer a creditor of Lopez Holdings, otherwise there would have been no need for a write off.
But the Lopezes had nothing to do with DBP’s decision to sell to a SPV and book a write off. Those were business decisions of DBP officers in the normal course of doing business. If a government bank cannot afford to make such decisions and take on such losses, it shouldn’t be in business.
It would be a different story if the Lopezes got the DBP credit facility by using political clout as in a behest loan. Indeed, the Lopezes didn’t need DBP’s money at that time. If DBP didn’t buy those debt papers, some other investor would have. As I recall, the offer was oversubscribed.
One other occasion I can recall when the Lopez Group had a substantial credit accommodation from DBP was in relation to the privatization of EDC. But that was in the nature of a bridge financing which would have been given to whoever won the bidding.
DBP, ING and Land Bank created a pool to offer the winning bidder the bridge financing to expedite the payment for the controlling shares in EDC. DBP and ING were the financial advisers of government in the privatization of EDC.
Indeed, I recall that the Lopezes were uneasy with the loan. That was partly why they sold their control of NLEX and Meralco to pay that obligation off as quickly as possible.
In other occasions where DBP had exposure to the Lopez Group (BayanTel and SkyCable), it was just one of the creditors treated equally by a court ordered rehabilitation or in negotiation with all creditors. Again, DBP would have been kept whole, had it not sold the loans to third parties.
DBP would have recouped what it wrote off had it waited. But the bank’s management was in a hurry to cut all ties with the Lopez group because the relationship of the Lopezes with the then reigning administration deteriorated.
SPV was created to protect banks and lenders more than benefit companies that were financed. As a result of this sale, DBP was healthier by getting out of a situation, while companies like Lopez Group needed to still pay their loans to whoever bought the debt. And pay it in full they did.
Now the latest news is that Duterte wants to “investigate” this DBP-Lopez loan matter. According to his latest pronouncement: “The Lopez group of companies never paid a single centavo. It was condoned by the government. Who condoned it? who authorized it? I really don’t know, but maybe one of these days I’ll start to dig” (Click here)
This is a major shift from his previous pronouncements that he was sure that hanky panky was involved. Could it be that Duterte was mislead by his own people? Could it be that he has suddenly realized that he has been hitting at the administration of his staunchest ally GMA and her officials, many of whom are in his administration now?
Whatever it is, Duterte propagandists, bloggers and trolls are doing their boss in by their own twisted messages.
As they say in Philippines: E-2-2-LOY.
JPFenix Blog 