SEC issue rules on creation of special investment vehicles

The Securities and Exchange Commission (SEC) has allowed the creation of special investment vehicles that will help hard-hit companies manage their balance sheets amid the COVID-19 pandemic.

The SEC said on Tuesday it issued the rules for corporate debt vehicles (CDV), which will mainly invest in debt paper of medium to large companies.

This will help free up the balance sheets of the target companies struggling during the health crisis.

According to the SEC, the CDV is a closed-end investment company with any number of qualified buyers or nonqualified buyers not exceeding 19 persons in the Philippines during any 12-month period.

Investors, without any voting rights, can participate in a CDV via an initial public offering while redemption is at maturity.

A CDV can make periodic distribution of income to investors on a pro-rata basis from cash received by such CDV from its interest income after deduction of applicable taxes and expenses.

It may also pay out the value of the underlying investments of each share/unit in a class upon maturity of the said underlying investments.

“CDVs can play a significant role in the survival and recovery of our economy from the impact of the COVID-19 pandemic by providing large corporations and medium-sized enterprises the necessary funding to meet their obligations, sustain their operations and preserve jobs,” SEC Chair Emilio B. Aquino said. INQ