Dominguez proposes new GOCC for troubled firms
Published Jun 8, 2020 12:00 am
By CHINO S. LEYCO
The Department of Finance (DOF) is proposing to create a new government-run company that will have a mandate to help troubled private enterprises considered as important to the Philippine interest.
Finance Secretary Carlos G. Dominguez III
Finance Secretary Carlos G. Dominguez III said that Land Bank of the Philippines and Development Bank of Philippine (DBP) will provide the initial capitalization to the proposed government-owned and -controlled corporation (GOCC).
“We propose to authorize Land Bank and DBP, through a holding company structure, to make equity investments in companies critical to the national interest that are experiencing solvency problems,” Dominguez said.
“Right now, we are still studying the total capitalization initially needed,” he added.
The goal of the plan, which is subject to legislative approval, is to help some corporations that are currently suffering from solvency due to coronavirus-induced economic crisis, the finance chief said.
“Some companies have solvency problems… solvency means you owe too much in relation to your capital. Banks, as banks, can solve liquidity problems, they can lend more money or they can extend the the the term of the loan to accommodate the drop in revenues,” Dominguez said.
“However, banks cannot solve solvency problems whereby the company has borrowed so much and cannot borrow any more money or extend any more loans because it will endanger the life of the enterprise. That is where you need investment,” he added.
“We are suggesting that Land Bank and DBP organize a new GOCC and that GOCC will be capitalized and will be empowered to make injections in companies that are important to the national interest,” Dominguez said.
The government investments may come in a form of preferred or regular shares, he said.
“We will invite others to invest in this vehicle as well and the potential investors could be the private sector arms of the multilateral agencies or private sector investors in both domestic and foreign," Dominguez said.
“We would like to invite them so that we can enhance our expertise in evaluating these roles,” the finance chief said,
Asked about the industries considered by the government as cristical to the national interest, Dominguez said that they are transportation and manufacturing companies.
Finance Secretary Carlos G. Dominguez III
Finance Secretary Carlos G. Dominguez III said that Land Bank of the Philippines and Development Bank of Philippine (DBP) will provide the initial capitalization to the proposed government-owned and -controlled corporation (GOCC).
“We propose to authorize Land Bank and DBP, through a holding company structure, to make equity investments in companies critical to the national interest that are experiencing solvency problems,” Dominguez said.
“Right now, we are still studying the total capitalization initially needed,” he added.
The goal of the plan, which is subject to legislative approval, is to help some corporations that are currently suffering from solvency due to coronavirus-induced economic crisis, the finance chief said.
“Some companies have solvency problems… solvency means you owe too much in relation to your capital. Banks, as banks, can solve liquidity problems, they can lend more money or they can extend the the the term of the loan to accommodate the drop in revenues,” Dominguez said.
“However, banks cannot solve solvency problems whereby the company has borrowed so much and cannot borrow any more money or extend any more loans because it will endanger the life of the enterprise. That is where you need investment,” he added.
“We are suggesting that Land Bank and DBP organize a new GOCC and that GOCC will be capitalized and will be empowered to make injections in companies that are important to the national interest,” Dominguez said.
The government investments may come in a form of preferred or regular shares, he said.
“We will invite others to invest in this vehicle as well and the potential investors could be the private sector arms of the multilateral agencies or private sector investors in both domestic and foreign," Dominguez said.
“We would like to invite them so that we can enhance our expertise in evaluating these roles,” the finance chief said,
Asked about the industries considered by the government as cristical to the national interest, Dominguez said that they are transportation and manufacturing companies.