Qualified Participants
- Open to holders of eligible Central Bank credit.
- Includes original creditors, banks, non-bank entities, and individuals acquiring debt on the secondary market.
- Subject to limits under existing banking laws and regulations.
Program Coverage
- Applies to investments involving acquisition of new shares in distressed local commercial, thrift, or rural banks.
- Includes banks under Central Bank-approved rehabilitation programs.
Eligible Debt for Conversion
- External debt principal maturities under the Central Bank Restructuring Agreement.
- Advances under the New Money Agreement.
- New Money Bonds.
- Other debt obligations approved by the Monetary Board under specific conditions.
Program Size
- Initial allocation of US$100 million face value for conversion on a first-come, first-served basis.
Application Fee
- Non-refundable fee of P15,000 payable at application submission.
- Fee subject to change upon Monetary Board directive.
Application and Approval Process
- Applicants submit letters with supporting documents to the Debt Restructuring Department.
- Debt Restructuring Department may request clarifications or additional information.
- Monetary Board has sole discretion to approve or deny applications.
- Applicants promptly notified of the decision.
Program Mechanics
- Approved holders surrender Central Bank Convertible Debt to the Central Bank.
- Central Bank issues non-negotiable, non-assignable peso-denominated Central Bank Notes (CB Notes) equivalent to the peso value of surrendered debt.
- CB Notes feature:
- Interest rate based on weighted average 364-day Treasury Bill minus a 25% implicit discount.
- Semi-annual interest payments.
- Five-year bullet maturity.
- CB Notes can be used to:
- Acquire equity in distressed local banks, with final maturity proceeds settling obligations to the Central Bank or PDIC.
- Be directly exchanged for shares in distressed banks; 75% of face value deemed paid with balance amortized over five years.
- CB Notes cannot be disposed or alienated prior to maturity within the bank.
Eligible Domestic Debt for Payment
- Includes current and overdue borrowings with the Central Bank such as CB-IBRD loans, emergency loans, special time deposits, overdrafts, accrued interests, penalties, liquidated damages, and unpaid fees.
- Excludes regular rediscount loans.
Closing Period
- Investors must complete closing within 90 days of Monetary Board approval.
- Failure to close causes automatic lapse of approval.
Suppletory Application of Circular No. 1267
- Provisions not inconsistent with this Program Circular, including capital repatriation and dividend remittance rules, apply to transactions under this Program.
Administrative Discretion
- Monetary Board may revise the Program periodically.
- Interested parties should consult the Debt Restructuring Department for updated guidelines before finalizing transactions.
Key Definitions
- Central Bank: Central Bank of the Philippines.
- Central Bank Buying Rate: Peso buying rate of foreign currency quoted at 11 a.m. Manila time on the banking day preceding closing.
- Convertible Debt: Eligible external debt as defined.
- Conversion Transaction: Investment in a distressed local bank funded wholly or partly by the redemption of Convertible Debt.
- Debt Restructuring Department: Central Bank department overseeing applications.
- Distressed Bank: Bank under conditions such as bank-run, continuous shortages in reserves or capital, losses, or as identified by the Monetary Board.
- New Money Agreement: $925 million credit agreement between Central Bank, Republic of the Philippines, and participating banks.
- New Money Bonds: Bonds issued under the 1990 Bond Subscription Agreement.
This Circular takes effect immediately upon promulgation.