New investment vehicle aims to boost liquidity for companies affected by virus

To help prevent the local financial crisis during this pandemic time, the Securities and Exchange Commission (SEC) is authorizing the creation of new investment vehicles called corporate debt funds (CDFs) that will invest primarily in debt securities of companies. large and medium enterprises.

“With the proposed regulatory framework, we hope to help avoid the credit and liquidity crises that could arise from the economic downturn caused by the COVID-19 pandemic, and support the recovery of businesses and the economy in general,” said SEC chairman Emilio Aquino said. a press release Thursday.

The CDF would be “particularly useful in meeting the liquidity needs of large and medium-sized enterprises for reimbursements, emergency spending and investments necessary to support their operations and preserve jobs in these difficult times,” added Aquino.

The SEC released for comment on July 8 the draft rules on minimum requirements and guidelines for the establishment and operation of such investment firms.

A CDF is a closed-end investment company that offers for sale a fixed number of equity units or non-redeemable shares and has a limited offer period. Its objective is to invest in the debt securities portfolios of large and medium-sized companies operating or receiving income in the Philippines, or any company guaranteed by a large or medium national company or by the Philippine government and / or its agencies. .

The CDF may offer different classes of shares or units with similar investment objectives but are managed as separate asset pools. Each class corresponds to a separate part of the assets and liabilities of the CDF.

Subscription to a CDF is made only through an initial public offering and repayment is made at maturity although it may make a periodic distribution of income to investors on a pro rata basis. It may also pay the proceeds of the underlying investments of each class of shares / units during their liquidation until the termination and maturity of its securities.

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