MANILA - There is a big difference between Philippine Depository Receipts (PDRs) issued by ABS-CBN Holdings Corp and those by Rappler Holdings, a lawyer of the broadcast network told a joint House committee hearing on Thursday.
At the continuation of the House hearings on the ABS-CBN franchise, Cynthia del Castillo, former dean of the Ateneo School of Law, said that in Rappler’s case, it had to get approval from two-thirds of the holders of PDRs before it could change the company’s bylaws. There is no such provision in ABS-CBN’s PDRs, she said.
“I think the basic difference between the Rappler provision and the ABS-CBN provision is that in ABS-CBN, this is a negative covenant. The PDR issuer committed that he would do this, but in the case of Rappler, there was really a requirement that there must be prior consultation with the PDR holders and the vote of the PDR holders to the extent of two-thirds,” Del Castillo said.
“So, one was negative (ABS-CBN) and the other one was affirmative - you have to bring them in so they can give you the approval,” she continued.
Del Castillo added that these “negative covenants” were common in all financial instruments.
“Kahit po sa mga bangko mangutang kayo, meron pong mga ganyang covenants.”
(If you borrow money from banks, there are these kinds of covenants.)
In February 2018, US investor Omidyar Network donated its PDRs to the Filipino managers of Rappler, as the government sought to shut down the news website saying its ownership violated the Constitution.
In July 2018, the Court of Appeals said that under a “zero foreign control standard,” Rappler’s PDRs which required the company to consult PDR holders before changing the company’s bylaws was ”tantamount to some foreign control.”
But the CA also remanded the case to the SEC, directing the regulator to evaluate the "legal effect" of Omidyar Network's donation of all its PDRs to Rappler staff.
In March 2019, the CA stood by its earlier ruling saying: "The grant of control to a foreign entity over a mass media entity, regardless of the actual exercise of such foreign control, is already considered a violation."
A couple of broadcast companies have also issued PDRs, which both government regulators and private securities dealers say are not equivalent to shares of stock or ownership of a company.
During Thursday’s hearing on ABS-CBN’s franchise application, a joint hearing of the House panels on legislative franchises and good government and accountability said it would probe all broadcast-media issued PDRs.
news.abs-cbn.com is the general news website of ABS-CBN Corp.