Corporate debt fund offered amid Covid

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The Securities and Exchange Commission (SEC) is paving the way for the establishment of a capital market that would allow investment in corporate debt papers of large and medium enterprises, as part of efforts to cushion the economic fallout of the Covid-19 pandemic.

“With the proposed regulatory framework, we hope to help avert credit and liquidity crises that may arise from the economic downturn caused by the Covid-19 pandemic, and support the recovery of businesses and the overall economy,” SEC chairperson Emilio Aquino said in a statement.

The new investment vehicle, called Corporate Debt Fund, will be helpful in providing for the liquidity needs of large and medium-sized corporations for repayments, emergency spending and investments necessary to sustain their operations and preserve jobs in these challenging times, the press release said.

A CDF offers for sale a fixed number of non-redeemable units of participation with an objective to invest in the portfolios of corporate debt papers of large corporations and medium-sized enterprises operating or deriving income in the Philippines.

To incorporate, the CDF shall have a minimum subscribed and paid up capital of P50 million.

The CDF may offer the securities to qualified buyers such as banks, pension funds, insurance companies and registered investment houses under private placements during a 12-month period.

The CDF shall also invest the proceeds from the issuance of securities in corporate debts, such as bonds and promissory notes of large corporations and medium-sized enterprises.

Investments in corporate debt issued by a single enterprise must not exceed 25 percent of the net asset value of the CDF and 50 percent for single group entities.*MPE

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