0 | ea | Repub fe Pains DEPARTMENT OF FINANCE | Rona avai Carnes Vio Cran Set Department Circular No. 2-99 Septeriber a7, 1999 To ‘Treasurer of the Philippines, Heads of Government Owned andlor Controlled Corporations, Chiefs of Financial and Management Services, - Budget Officers, Chief AccountantsiHeads of | Accounting Units," Propetty OfficersiCustodians and COA Unit Auditors of the Nationa Treasury and Government-Owned andior Controlled Corporations an¢ All Others Concerned, SUBJECT IMPLEMENTING RULES AND REGULATIONS TO. ADMINISTRATIVE ORDER NO. 10. ENTITLED ‘STRENGTHENING AND ENHANCING THE PROCEDURES FOR SETTING THE ANNUAL NET LENDING PROGRAM FOR GOVERNMENT OWNED —ANDIOR CONTROLLED GORPORATIONS (GOCCs), AND GUIDELINES FOR THE CONVERSION OF NATIONAL GOVERNMENT ADVANCES, INCLUDING INTEREST ON NATIONAL GOVERNMENT: ADVANCES INTO EQUITY AND/OR SUBSIDY TO GOCCS" Section 1, Purpose: To prescribe the guidelines, crtera, grounds and procedures which st govern: (a) the setting of annual net lending program for GOCC, Obtaining/aranting actual NG advances; and (e) endorsement for cove Into equity andor subsidy of National Government (NG) advances on intecet Payments and principal repayments on loans of GOCCs, “andlor interest Charges on net advances made by the Bureau of Treasury (BTi) om be Servicing of loans of GOCCs. Section2, Coverage agreements, Section 3, Procedures For setting of annual net le endorsement of convess Including int '9 program, obiaininglgranting NG advances and inlo equity andior ‘subsidy of NG advances st on NG Advances,\ 3.4. Formof request . 32. Just ‘All requests for annual programming of NG advances, actual NG ‘advances or proposals for the conversion of outstanding NG advances andior interest on outstanding NG advances shall be signed by the Chief Executive Oficer of the requesting GOCC ‘and addressed to the Secretary of Finance, copy furnished the Treasurer ofthe Philippines, ‘The request shall clearly indicate the amount of) NG advances for annual programming; i) maturing loan for NG advances, o i) ‘outstanding NG advances andlor interest on outstanding NG ‘advances which is proposed to be converted into equity andlor subsidy as the case may be, jan and Supporting Documents ‘The GOCE shall justify the request by submitting the following documents: For annual programming of net lencing: (Board of Directors’ approval of the request end ‘management pian for the repayment of the requested ‘advancels: (®)Corporateiproject financial projections covering the ie of the loan, ‘consisting of pro‘orma income. statement, balance sheet and cash flows together with the set of assumptions used; ‘Schedule of debi servicing of the subject loan and other formation on the terms and use of the loan; Corporate financial performance during the last three (3) years including audited financial statements, anal Feports and conventional cashflow statements, and (¥) Otter documents as may be required by the Department of Finance (DOF), For actual advances: Purpose, date, terms and outstanding balance of the ‘maturing lar Income statement, balance sheet and conventional cash flow forthe prior year. ‘Actual quarterly noome statement and balance sheet, andwi ly conventional cash fows for the period prior tothe debt servicing period being requested: and projected uarterly income statement and balance “sheet, and ‘monthly conventional cash flow(s) for the. remaining months of the y Updated actual cash flow and Cash and Investment Balance Report as may be required wihin the period of Processingleval Income statement, balance sheet and conventional cash flow forthe succeeding year, Board of Directors’ approval of the request for NG ‘advances beyond the GOCC's net lending program and ‘management plan for the repayment of the requested advancers; a For conversion into equity or subsidy of outstanding NG advances w ereon: come statement and Consecutive years prior hen the proposal is made: Projected income statement, balance sheet and ‘onventional cash flow covering five-year period stating rom the year when the proposal is made, GOCC Board that loans advanced by for conversion were used ich are not purely recoverable Dr which by its nature require NG support: Breakdown of NG advanoas for conversion as to andlor 3, purpose of d._ In case of unroconciled as may be required by the DOF but not sm term projection and capital expenditure scted upon unless the GOCC submits compete above eaberents\ 3.3. Period of submission All requests for programming of net tending assistance and ‘conversion into equity andlor subsidy of NG advances andor interest thereon shall be submitted to the DOF on or before February 18 for the programming of required advances, and implementation of conversion forthe succzeding year. ‘A applications for actual drowdowns from the net lending rogram shall be submitted to the DOF ninety (80) days prior the scheduled actual drawdown, 3.4. Processing of requestiproposal b, For annual programming of NG advances The DOF-Corporate Concerns Office/Coxporate Affairs Group (DOF-CCO/CAG) shall review and evaluate requests for programming of net lending assistance in ‘accordance but not limited to the Sec. 4.4 teria provides under Budget and Coordinating Committee is successor. The decision of the DBCC shall al programming and monitoring Borrowing Requirement and the Consolidated Public Sector Financial Postion, and ‘The DOF-CCOICAG shall closely coordinate with DBM in ‘order to get the final amount for Net Lending Program for the budget year which wil be used as one of the Basis for the granting of actual NG advances, Actual NG advances (The DOF.CCOICAG shi for NG advances base: favorably endorse to the BTr jOCCs for actual drawdounsmonth, © Proposals forthe conversion of oustanding NG advances andlor interest on outstanding NG advances, () The DOF-CCOICAG shall review and evaluate al Proposals based on See. 4.3; ) The Tr shall furnish DOF-CCOICAG @ statement of ‘outstanding advances andlor interest on net advances of the GOCC as reconciled with the GOCC concermed and uly vetted by the COA representative at the BT The statement shall show the breakdown of advances far earn GOCC fan to include those loans being proposed tor conversion; . ) The DOF-CCOICAG shall submit the proposal with its findings and recommendations o the Secretary of Finance {or decision; )Belore April 18 of the year prior to the year when the Conversion shall be implemented, the Secretary of Finance shall notiy the DBM in writing, copy fumished the GOCG. ‘concerned, about the approval of request for conversion ino equity and/or subsidy and shall favorably recommend its inclusion in the proposed budget for the suscosdina year, (9. Before Apri 15 of the curent year when conversion shall be implemented, DOF shall notiy the DBM with respect to GOCC's compliance to condiions for conversion if any or {0 consider new developments to determine whether the intial recommendation to conver is plicable, and The DOF shal notify the GOCC concemed:of any action taken on the proposal far conversion ( Section 4. Criteria for Evaluation 4.1. _ Annual programming of NG advances a all review and evaluate the projected recelpts and expenditures of the requesting GOCC taking into ing tariff jon policy and procedures, vels and asset management the laan obligations being Tequested for incision inthe annual net lending program taking42 43, eae Sonsideration information onthe use of the loans ie, if the {or undertakings/projects which are not purely ‘recoverable or which by their nature requite NG support, aed © Advances shall be programmed only when the projected cash Naw ofthe requesting GOCC which alteady takes inte accnrat Aeuatbsity and eauity support, ceariy indicates insufincy ot funds forthe settement of maturing abligations Granting of actual NG advances to COCs Provision of aotual NG advances ‘shall be done only when the fequesting GOCC which already takes into account aetuel NG {ubsty and eauity suppor, clearly indeates insuicency of ngs Cok the setilement’ of “maturing obligations ebing requested; and b. Net lending to GOCCs ou » 's due to high interest payments and foreign exchange losses, heavy relance on loans, ard ‘non-cost recoverable tarifpricing structure "unforeseen events which prevent GOCCs from paying ‘maturing obligations: and ii) 0 workable option for improving ts cash position NG ene of eutstanding NG advances andor inerest on oustanding NG advances: The DOF shall vaidate and evaluate the financial ‘requesting GOCC. The evaluation s financial ratios on liquid, leverage and 5 The five-year projected cash flows stating fram the year when the proposal is made, should indicate inf have been carefully Consideration on the reasonableness, Selig lant structure, pricing policy, operating and. capital ‘expenditure levels and scope of operations ta be nonieren request the formation on the lquidationisaleSection 5° Section 6. \ Tr setaitch shal be considered inthe evaluation as an option 'n mproving ts cash postion and for Servicing of maturing debe & In oder to be considered meritorious, the proposal shoud clearly seat D the GOCC is experiencing cash flow diteuinn: resulting from, but not fimited 10 high foreign exchange loases, heavy 1 Tecoverable tarfipricing stuctore {or improving its cash postion, terest payments and iance on loans, and non-cast there is no workable opton the loans advanced by nversion were used for s/pojects which are not purely recoverable oF which by their nature require NG support, Proposals ftom GOCCs for the conversion of NG advances ndior interest advances into equity shall be within the By eee capitalization of the GOCE concemed as autnoicen Pi otf charter. the requesting GOCC's cantstenien fully paid-up or alms aid-up.* DOF-CCOICAG may ‘recommend’ conversion iter on chargeable to equity upon inerease in Ptalzation, depending on SIRS Gonversion shall rot violate any intematonal commitments {and other applicable covenants, ‘iniarw.and oer pes of obligations of a GOCC and ts substi elena, assumed by the NG and which ae covered brass ‘ssuances shall form part of Ne's Debt Sewioe Progen Penalty Charge on NG Advances out favorable endorsement 10 364 day T-Bil rate plus 5% sh ‘This shall be in addtion to the mm the DOF, a bee imposed on intaroet on NG Pane\ Section 8 Resolution of Related Issues Cases for claificatian and those not cov Shall be referred to the DOF tor app Secton 9, ered by the provisions of this Circular opiate action, Repeating Clause All Circulars or parts thereof which are inconsistent repealed or motified accordingly, 's Creular are hereby Section 10. effectivity ‘Ths Circular shal take effect immediately upon approval ‘APPROVED this 7h day of_Sptembor 1990, DGARDO B. ESPIRITU Secretary of Finance ‘CEMTIFED TRUE age