Tan offers 2 options on PNB shares

Business tycoon Lucio Tan has offered the government two options on Philippine National Bank (PNB) shares following their continued disagreement over pricing.

According to Finance Secretary Jose T. Pardo, while Tan has indicated his willingness to join the government for a block sale of PNB, the taipan also presented another option to the government to get back their PNB shares by simply rescinding his original agreement with the PNB-Retirement Fund Inc. (PNB-RFI).

Pardo said Tan has suggested the possibility that his agreement with PNB-RFI be rescinded.

Government, however, is brushing off Tan's suggestion, insisting on a block sale.

Government legal experts said rescinding the contract between Tan and PNB-RFI may just lead to more complications and would likely cost the government more.

For one, under the agreement between Tan and PNB-RFI, the PNB shares were effectively priced at P160.23 each.

Tan had extended P3.3 billion to PNB-RFI in the form of a loan.

Rescinding the agreement, legal experts said, will require the government to pay Tan back the P3.3 billion, plus interest plus premium.

At the Philippine Stock Exchange, PNB shares were traded yesterday at P70.50 each, less than half the P160.23 per share stipulated in the agreement between Tan and PNB-RFI.

The block sale had run into a bit of a technical problem since Tan has not yet formally acquired the PNB shares.

Under the agreement with PNB-RFI, Tan extended a P3.3 billion loan to the pension fund, which was used to subscribe to PNC's rights offering.

In exchange for the "loan," the PNB-RFI used the PNB shares as collateral and a "put and call option" gave Tan the option to either treat the P3.3 billion as a loan or exercise the option to buy the PNB shares at P160.23 each with the P3.3 billion as full payment.

Without the formal transfer of the shares, government could not technically enter into an agreement with Tan unless he decided to commit with PNB-RFI to a pool or block sale. - By Marianne V. Go