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Confusion among Ongpin’s minions

(Article published in the Dec 14,2011 issue of Manila Standard Today) 

They were running like chicken without heads.  Because, I suspect, their head was not around to give them direction and orchestrate their specific spiels.

Roberto V. Ongpin was out of the country, off to celebrate, well-deservedly, his wedding anniversary. Left to fend for themselves were my hapless (and, in my view, helpless) former classmate and then Secretary of Finance, Margarito Teves, former Development Bank of the Philippines (DBP) President Reynaldo David, current Land Bank of the Philippines (LBP) President Gilda Pico; and, to their deep consternation, members of the DBP and LBP bureaucracy who were involved in the loan under consideration.

The Senate Blue Ribbon Committee and the Senate Committee on Banks, Financial Institutions and Currencies were on 06 December 2011 were on its fourth hearing on the loans and transactions subject of Senator Panfilo Lacson’s Senate Resolution No. 555.  The specific focus for the day was the $90 million each loan granted by DBP and LBP, for a total of $180 million, to special purpose vehicles (SPVs) known as Global Air Services (GAS), First Digital Trading and Bellsky.

According to Teves, the government during his watch, in an effort to solve the traffic problem on the Epifanio de los Reyes Avenue (EDSA), sought to establish thereon an efficient rail system.  The government did not have the money to do so and thus conceptualized a build-lease-transfer scheme wherein, essentially, the private sector would finance the system, lease it to the government, and eventually (after the lease payments have reached a level that would give the private sector going into the scheme) transfer the system to the government.
 










     

The consortium of private sector financiers, which formed what is known as the Metro Rail Transport Corporation, infused equity, from 1995 to 1997, in the amount of $190 million, and got a loan amounting to $489 million.  The rental payments (known as Equity Rental Payments [ERPs]) were so structured to yield the private investors 15% return on their equity.  In addition, the government (as the lessee) was to also pay for the $489 million loan, through rent known ad “Debt Rental Payments.” 

As it turned out, the government, because the fares collected from the metro rail passengers, were way below even of the cost of running the system, was not able to pay the ERPs.  In short, the government (specifically the Department of Transportation and Communication) defaulted on its obligation  to pay the ERPs.  And the people tasked to find a solution thought that the way to go was to simply buy out the equity of the private sector.

The private sector was willing to be bought out at the price also found reasonable by the government, and the agreement thereon, as well as the rest of the contract, was termed as a “Consensual Rewind.”  The “consensual unwind” was really financial/legal gobbledygook to mean a mutually agreed way of not enforcing the contract in all its terms and conditions; a compromise agreement of sorts, that enables the parties to depart from its original conception.

Gloria Macapagal’s administration, however, dragged its feet on implementing the “consensual unwind.”  But when, as the year ended, the MRTC sent out equity value buyout notices to DOTC claiming  $2.5 (amount due, plus plus) as well as notices of arbitration, the Department of Finance (DOF) which headed the study group, gave instructions to the government financial institutions to start the buyout of the private group.

Obviously, the government was bluffed into acting quickly by talk of a (1) possible downgrade of the Philippine credit rating, (2) possible shut down of the MRT system, and (3) possible judgment against it for $2.5 million in case it lost in the arbitration case.

It was at this point in the explanation of the very complicated transaction became the epitome of confusion compounded.  Teves could not remember exactly why the DOTC initially refused to sign off on the “consensual unwind”; he did not even remember who was director of the NEDA at that time.  Towards noon, when asked by Senator Recto what role Ongpin, if any, played, “Hindi ko po alam dahil ang nag-implement land n’yan ‘yung LandBank (of which he, Teves was chairman) po at saka ‘yung DBP”. 

David, tried to help out, but he had to rely on Teresa Quirino to flesh out his general understanding because he was not, according to him, “frontally involved.”

Eric Recto, relative of Roberto V. Ongpin, claimed that “my exposure to the MRTC transaction was quite limited during my tenure as DOF undersecretary…so it is something I am familiar with but never really got involved in them…”

On the persistent probing of Senator Enrile, Teves had to repeatedly say, “We’ll check on that specific question…”   And to Senator TG Guingona’s question of just the names of the people who worked on the figures (which apparently was a major bone of contention between Secretary Larry Mendoza of DOTC and the DOF), he had to say “I cannot recall, but I guess I will have to check again the names of the people who were working with our technical working group then.”

But it was Atty. Rodolfo Ponferrada, Ongpin’s lawyer, who took the cake.  He claimed that he did what he did because “he was talking with both Mr. Ongpin (who had, a hearing earlier, said he did not have anything to do with the transaction) and Craig Webster of Ashmore.”  What he (Ponterrada) did, according to him, was not to represent Ashmore here in the Philippines, but instead, “we just did administrative, clerical, ministerial tasks on behalf of Ashmore precisely because, as I understand earlier, Ashmore does not have an office here in the Philippines.” 

“There is a nuance” according to Ponferada, between signing on behalf of Ashmore and signing as an accommodation to Ashmore. 

Somebody had better come forward and make clear everything about this “nuance” lest even Roberto V. Ongpin decides to dismiss him for having become, by his hemming and hawing at the Senate hearings, no more than a mere nuisance.

     

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