Philippine Social Security System to Sell Stake in Equitable PCI Bank

The Philippine Social Security System has agreed to sell a 25% stake in Equitable PCI Bank to retail magnate Henry Sy's Banco de Oro, part of an effort to cut losses and recover from bad investments allegedly made by former President Joseph Estrada. The sale price is below the acquisition price of 83.20 pesos per share, but SSS will receive a cash payment and a promissory note with a face value of 14bn pesos. Analysts criticize the management's decision not to recognize losses on the transaction, calling it "mirrors and shadows kind of accounting."

Key Takeaways:

• The Philippine Social Security System has agreed to sell a 25% stake in Equitable PCI Bank to Banco de Oro for 188m shares at 43.50 pesos each, a premium of 30% to the stock's closing price.
• The sale price is below the 83.20 pesos per share at which SSS acquired its stake in 1999, but SSS will receive a cash payment and a promissory note with an aggregate face value of 14bn pesos.
• The deal is part of an effort by SSS to cut losses and recover from bad investments allegedly made by former President Joseph Estrada, who is in jail facing trial for corruption.
• The investments in Equitable PCI Bank accounted for more than half of the pension fund's unrealised stock market losses of 11.2bn pesos at March 2001.
• The sale has yet to be approved by the governing boards of Banco de Oro and the SSS, and will have to be referred to the Monetary Board and other regulators.
• Analysts criticize the management's decision not to recognize losses on the transaction, calling it "mirrors and shadows kind of accounting."
• Corazon de la Paz, SSS president, said the pension fund "shall not post any loss for the entire transaction."

Statistics:

• 25% stake in Equitable PCI Bank to be sold to Banco de Oro
• Sale price of 188m shares at 43.50 pesos each
• Aggregate face value of the promissory note: 14bn pesos
• Unrealised stock market losses of SSS: 11.2bn pesos at March 2001
• Acquisition price of SSS stake in 1999: 83.20 pesos per share
• Closing price of Equitable PCI Bank stock on December 30: 33.50 pesos
• 30% premium to the stock's closing price

Sources:

• "SSS signs letter of intent to sell stake in Equitable PCI Bank", The Manila Times
• "SSS to sell stake in Equitable PCI Bank", BusinessWorld
• "KPMG audit reveals SSS' unrealised stock market losses", Philippine Daily Inquirer
• "Former banking regulator criticizes SSS' accounting decision", The Philippine Star