"We have reviewed the contract documents and find the same to be consistent with the law," Justice Secretary Hernando Perez wrote in a one-page opinion, addressed to the Department of Finance and the Philippine Deposit Insurance Corp.
Perez gave Finance Undersecretary Cornelio Gison and PDIC president and chief executive officer Norberto Nazareno the go-signal for the rehabilitation of the formerly state-owned PNB, which has a contract with PDIC.
The DOJ chief clarified, however, that he can only give advice with regard to legal matters. "The legal review is confined to matters of law and does not take into account the financial and economic aspects of the agreements."
Perez stressed these issues are "best addressed by the financial and economic managers of the government." PNB is now 76-percent owned by beer and tobacco magnate Lucio Tan.
Previous reports had indicated that three issues had delayed the privatization plan, which included the proposed voting rights for the government, the debt-to-equity conversion plan, and the legality of the whole scheme.
The documents PDIC and DOF submitted constitute the whole rehabilitation plan for PNB. These would have to be signed by representatives of the government, the PDIC, and the PNB or the Lucio Tan group.
The Cabinet secretary told reporters in a chance interview that he upheld the legality of the contract documents after "amendments" were made by the parties concerned.
"They made the necessary adjustments so that they are now creditors and debtors of each other. The other one is that we pointed out that the government should have greater participation in the PNB," Perez said.
Perez declined to explain further, except to say that the respective shares of the parties were "outlined" in the documents. He refused to give further details, saying "I don’t want to make a mistake."
Last January, the justice department sent back to the finance department the proposed PNB rehabilitation plan.
Reports said the government and Tan had agreed to convert P7.8 billion of PNB’s P25-billion emergency loan from the Bangko Sentral ng Pilipinas and the PDIC into government equity in the bank.
The debt-to-equity conversion would raise the government’s stake in PNB to 44.98, equaling Tan’s stake which would be reduced from the present 67 percent to 44.98 percent.