MANILA – The Securities and Exchange Commission (SEC) has approved the regulatory framework for the creation and operation of new investment companies that will primarily invest in corporate debt papers.
The Commission on August 18 issued SEC Memorandum Circular No. 23, Series of 2020, which provides the rules on corporate debt vehicle (CDV) to support the liquidity needs of large corporations and medium-sized enterprises in the middle and aftermath of the coronavirus disease (Covid-19) pandemic.
“CDVs can play a significant role in the survival and recovery of our economy from the impact of the Covid-19 pandemic by providing large corporations and medium-sized enterprises the necessary funding to meet their obligations, sustain their operations and preserve jobs,” SEC chief Emilio Aquino said in a statement Tuesday.
A CDV is a closed-end investment company that issues or offers for sale its securities consisting of either shares of stock or units of participation in such CDV to any number of qualified buyers and/or non-qualified buyers not exceeding 19 persons in the Philippines during any 12-month period with the specific objective of investing in the corporate debts of large corporations and medium-sized enterprises.
It may offer different share or unit classes with similar investment objectives but managed as separate asset pools, with each class corresponding to a distinct part of its assets and liabilities.
Subscription in a CDV is done only on initial public offering and redemption is at maturity.
However, a CDV offering units of participation can make periodic distribution of income to investors on a pro-rata basis from cash received by such CDV from its interest income after deduction of applicable taxes and expenses.
It may also pay out the value of the underlying investments of each share or unit in a class upon maturity of the underlying investments.
The unit holders of a CDV shall have no voting rights but they are entitled to be notified of any material change to the prospectus, product highlight sheet, and subscription agreement.
Proceeds from the issuance of CDV securities shall be invested in any bonds, notes, commercial papers, debentures and other evidence of indebtedness, whether secured or unsecured, of large corporations and medium-sized enterprises operating or deriving income in the Philippines.
A CDV may also invest in corporate debts guaranteed by a large or medium-sized domestic corporation or by the Philippine government and/or its agencies or by multilateral agencies involving exempt securities under Rule 9.1.2.3 of the 2015 Securities Regulation Code Implementing Rules and Regulations. (PR)
