Reverse privatization' of PNB probed By MARIO B. CASAYURAN MANILA BULLETIN 02/12/2002 The Senate leadership asked yesterday two of its committees to look into the highly controversial reverse privatization of the ailing Philippine National Bank (PN. Senate President Franklin Drilon made the move after Senate Minority Leader Aquilino Pimentel Jr. rose to deliver a privilege speech in yesterday's plenary session asking that details of the reverse privatization be made transparent in accordance with constitutional requirements. Pimentel warned that the government is bound to incur massive losses if it pushes ahead with its plan to convert the bulk of its P25 billion loan to the privatized PNB into equity as part of its rehabilitation plan. He also urged Malacańang to scrap the debt-for-equity swap which he said is grossly disadvantageous to the government and would defeat the very purpose of privatizing the PNB. Tasked to undertake the inquiry were the Senate finance and banks committees chaired by Senators John H. Osmeńa and Ramon B. Magsaysay Jr., respectively. Pimentel asked that acting Finance Secretary Jose Isidro N. Camacho and Rafael Buenaventura, Bangko Sentral ng Pilipinas (BSP) governor, to inform the Senate on the terms of the impending PNB rehabilitation plan before it is consummated. He reminded Camacho and Buenaventura, supporters of the buy-back deal, that the privatization program was intended to rid the government of unnecessary expenses and enormous losses incurred in running business enterprises. The former Senate President told his colleagues that he delivered a privilege speech last Nov. 14 where he raised the need for Camacho and Buenaventura to disclose the details of the impending sale of PNB shares of the Lucio Tan group to the PNB but nothing seems to have moved along the line I had espoused. The government can ill-afford these convoluted and hare-brained debt-for-equity schemes. The national government's outstanding public debt has breached the P2.7 trillion mark as of August of 2001, he said. The PNB was taken over by the Lucio Tan group a few yeas ago but is again saddled with the same problems that plaqued it before it was privatized. After the PNB was supposedly hit by a massive bank run last year, Pimentel said the bank availed of a P25-billion emergency loan from the government, of which P15 billion came from the BSP and P10 billion from the Philippine Deposit and Insurance Corp. (PDIC). He said he was informed that the loan was collateralized by the non-performing assets (NPAs) of PNB. He said the interest on this loan is bleeding the PNB, the biggest portion of which is due to the interest expenses on the loan. Of the P25 billion original principal of the loans, the PNB has been able to pay back only P1.1 billion. To help the PNB get out of this mess, Pimentel said the government is being asked to buy back shares from the former government-owned bank at P40 per share until its present 16 percent stake in the bank is raised to 15 percent. The Lucio Tan Group now owns 67 percent of the PNB but the BSP is said to be deciding how much of the P25 billion loan will be restructured. Pimentel said the amount of the loan they may be restructured may go up to as high as P17.2 billion after P7.8 billion is converted into government shares in the bank. My question is why is there a need for this debt-for-equity swap that will generously allow the Lucio Tan Group to retain 45 percent ownership? The government could have walked in after April 2001 when the loan became due and foreclosed the collateral put up by the PNB, he said.