CBP Circular Letter

December 22, 1982 CBP CIRCULAR LETTER TO : All Banks and Financial Institutions Qualified to Extend Committed Credit Lines to Commercial Paper Issuers Please be advised that the Monetary Board approved amendment of Sec. 3(a) (5) of the New Rules on Registration of Short Term Commercial Papers, as proposed by the Securities and Exchange Commission, involving the addition of a new item after Item (iv) thereof, to read as follows: "(v) Notwithstanding the foregoing requirements for a committed credit line with a bank, or any financial institution which may be qualified subsequently by the Central Bank of the Philippines, any corporation desiring to issue commercial papers may be exempted from compliance therewith by the Securities and Exchange Commission, should it meet all of the following financial ratios based on consolidated audited financial statements for the immediate past three (3) years. 1. Average current ratio shall be at least 1.2:1 computed as follows: Current assets Current ratio = Current liabilities Average acid-test ratios shall be at least 0.5:1 computed as follows: Cash, receivables and marketable securities Acid-test ratio = Current liabilities 2. Average solvency position shall be one whereby total assets must not be less than total liabilities; 3. Average net profit margin shall be at least 3 percent computed as follows: Net income after income tax, corporate development taxes and other non-cash charges Net profit margin = Net sales or revenues Or Average annual return on equity shall be at least 8% computed as follows: Net income after income tax, corporate development taxes and other non-cash charges Return on equity = Total stockholders' equity 4. Average interest service coverage ratio shall be at least 1.2.1 computed as follows: Net income before interest expense, income tax, corporate development taxes and other non-cash charges Interest service = coverage ratio Interest expense 5. Debt to equity ration not exceed 2. 5:1. The Securities and Exchange Commission may, in its discretion, consult with industry organization(s) such as Investment Houses Association of the Philippines (IHAP) and Bankers Association of the Philippines (BAP) and/or the Credit Information Bureau, Inc. These amendments shall take effect immediately after their publication in the two (2) newspapers of general circulation where the original New Rules on Registration of Short Term Commercial Papers were previously published." The New Rules on Registration of Short Term Commercial Papers are found in Appendices 18, 21 and 15 of Books I, II and IV, respectively, of the Manual of Regulations for Banks and Other Financial Intermediaries. (SGD.) JAIME C. LAYA Governor