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SEC preparing guidelines on Corporate Debt Fund

The Securities and Exchange Commission said Thursday it is drafting the rules on Corporate Debt Fund—a new investment vehicle that will invest in debt paper of large corporations and medium-sized enterprises.

It said in a draft memorandum circular that the proposed rules on CDF aimed to cushion the economic impact of the coronavirus 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 therefrom,” SEC chairperson Emilio Aquino said.

“The new investment vehicle called Corporate Debt Fund will be particularly 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,” he said.

Under the proposed guidelines, CDF will be classified as a closed-end investment company that will invest in the portfolios of corporate debt papers.  Subscription in a CDF is done only on initial public offering and redemption is at maturity although it can make periodic distribution of income to investors on a pro-rata basis.

It may also pay out the proceeds of the underlying investments of each share/ unit class upon their liquidation until the termination and maturity of its securities.

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

The CDF may issue its shares or units in tranches. It will issue the first tranche within six months from the approval of its simplified prospectus and product highlight sheet, and the subsequent tranches within three months from the filing of a current report outlining the material changes in its prospectus and the updated prospectus.

The CDF may offer the securities to qualified buyers such as banks, pension funds, insurance companies and registered investment houses under private placements, or to not more than 19 non-qualified buyers in the Philippines during a 12-month period.

It will invest the proceeds from the issuance of securities in corporate debts such as bonds and promissory notes of large corporations and medium-sized enterprises. However, it may also invest in deposits and money market instruments, pending the deployment of the proceeds in accordance with its investment objectives.

Topics: Securities and Exchange Commission , Corporate Debt Fund , Emilio Aquino
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