Incentives OK’d for debt-equity swap between NSC, creditors

The Bangko Sentral ng Pilipinas (BSP) has granted incentives to the debt-for equity swap between National Steel Corp. (NSC) and its creditor banks, the first sale of its kind under the Special Purpose Vehicle Act.

The Monetary Board approved the incentives covering the disposition of some P13.792 billion worth of obligations that would be transferred to a special purpose vehicle.

Since its ratification in 2002, transactions under the SPAV have all involved the sale of individual assets instead of entire portfolios which was the primary target of the incentive program.

The incentives were granted by the Monetary Board last week after the BSP examined the transaction to determine whether it was qualified under the SPVA.

The BSP had initially thought that the transaction would not qualify for tax breaks and other incentives because it was not a "true sale" of NSC’s bad debts.

NSC’s loans are registered as qualified bad loans under the SPAV registry of the BSP but the sale of the bad loans did not involve the creation of an asset management company since it was basically a partial bail-out by a new investor, the Global Infrastructure Holdings Inc.

Moreover, instead of one bank selling a portfolio of bad loans, the NSC transaction involved a group of 18 creditors selling a single bad loan by a single company.

According to BSP Governor Rafael Buenaventura, however, the BSP had determined that the disposition and restructuring of the NSC debt was still qualified for incentives under the SPVA.

"We’re happy this is finally coming through," Buenaventura said.

GIHLI had poured sweeteners into its offer for NSC and increased its original purchase price from P11.905 billion to P12.250 billion, an offer that ultimately compelled the creditors to enter into the agreement with the group.

GIHLI’s sister company, the Netherlands-based LNM Group Holdings N.V., also made an offer but GIHLI was in advanced stages of negotiations with NSC’s creditors.