Restructuring of P15-B PNB loan to come after government, Tan ink deal

The Bangko Sentral ng Pilipinas (BSP) said it will not go to the negotiating table for the restructuring of a P15-billion loan by the Philippine National Bank (PNB) until business tycoon Lucio Tan and the government sign an agreement on the reverse privatization of the bank, returning to government majority control of the bank.

"We can only talk about the restructuring of the loan only after the signing of the agreement," said BSP Governor Rafael Buenaventura.

"When the issue of ownership has been resolved, it will be easier to talk about it. We also do not want to comment because there have been too many false starts already," added Buenaventura.

The group of Tan and the government are expected to sign the final agreement next week on the takeover of the business tycoon’s major shareholdings in debt-strapped PNB.

The two parties agreed earlier to set Friday next week or Nov. 16 to come up with a final agreement on how the bank’s debts will be restructured and subsequently, its rehabilitation program worked out.

Tan earlier was said to have agreed to reduce the par value of PNB shares from P60 to P40 per share.

Just as soon as an agreement is nailed, the other components of the turnover will be threshed out. These include the conversion price for shares that Tan will give up and which will be absorbed by the government through a debt-to-equity conversion scheme, management control of PNB, settlement of the bank’s obligations to the government and later on, the joint sale of shares by both groups.

PNB has an existing P25-billion emergency loan from the state-run Philippine Deposit Insurance Corp. (PDIC) and the Bangko Sentral ng Pilipinas (BSP).

Of the P25 billion loan of PNB, P15 billion is owed to the BSP and P10 billion to PDIC.

Depending on the specific terms of the deal, the debt-to-equity conversion or reverse privatization will effectively increase the government’s stake in the country’s sixth biggest lender to close to 50 percent from its current stake of 16 percent.

Currently, Tan’s group own roughly 67 percent of PNB while the state holds 16 percent interest in the bank.

Specifically, government will assume BSP loans to PNB by swapping for it P15 billion in bonds and Treasury bills. On the other hand, PDIC’s loan of P10 billion to PNB, will be swapped with shares in the bank.

PNB incurred the loan when it was deluged with heavy withdrawals in October of last year.

The plan involves infusing fresh capital and the entry of a new senior management team which is expected to work on the turnaround of the bank and make it profitable and "attractive" to potential buyers of government’s and Tan’s stakes in the bank.

Sources said the two parties also agreed on a scheme to appoint their respective representatives in the management of PNB.

Under the proposed mechanism, government will nominate its own people while Tan selects from the government nominees.

Currently, there is an interim management led by PDIC president Norberto Nazareno and former central banker Feliciano Miranda Jr. as president.

The sources said Nazareno can continue managing the bank because PDIC also has a loan exposure in the bank, but when the final team is composed, he could be replaced and appointed as bank director.