GMA7 buys back PDRs

GMA Network Inc. is buying back its Philippine Depositary Receipts (PDR) in a preemptive bid to protect its foreign investors.

GMA Network said in a Philippine Stock Exchange filing on Tuesday its board of directors had approved the acquisition of PDRs issued by GMA Holdings Inc. at P4.55 per share or lower until Oct. 31 this year. This is about 46.5 percent less than their issue price of P8.50 per share in 2007.

The Constitution prohibits media companies in the Philippines from having foreign owners.

PDRs are an alternative and government-approved measure for companies in industries with foreign ownership restriction to raise money from foreigners. The foreign investors instead receive dividend payments and are not assigned voting rights that regular common shares have.

After the buyback, GMA will no longer have any PDRs. GMA Network said once the purchase is completed, it will convert the PDRs into common shares.

The decision comes after a House of Representatives committee voted last July 10 to deny media giant and GMA rival ABS-CBN Corp. a new 25-year franchise after questioning, among other items, its sale of PDRs during a series of hearings.

The Securities and Exchange Commission earlier approved the PDR offers of ABS-CBN and GMA Holdings.

In its filing, GMA said the issuance of PDRs “might be affected by the findings and recommendations of the Technical Working Group as adopted by the House of Representatives Committee on Legislative Franchises on the application for a new franchise of ABS-CBN Corp.”

The development underscores the broader impact of ABS-CBN’s recent franchise hearings on investments beyond the loss of the media giant’s television and radio broadcasts and the mass layoffs that followed.

GMA issued its own PDRs in 2007 because it was an accepted means of raising money. ABS-CBN issued its PDRs in 1999 in the wake of the Asian Financial Crisis.