MANILA - The government may now proceed with the conversion of the sequestered shares in listed conglomerate San Miguel Corp. (SMC) into higher yielding-preferred shares, Acting Justice Secretary Agnes Devanadera said.

Ms. Devanadera, who is also is also the concurrent Solicitor General, told reporters late Thursday that the Presidential Commission on Good Government has not been precluded by the Supreme Court from doing so.

Supreme Court spokesman Jose Midas Marquez said the high court "noted and admitted" the government’s proposal during last week’s en banc session.

Ms. Devanadera has taken to mean that "the ’noted and admitted’ is a logical conclusion of a favorable resolution. So therefore we could proceed." She however stressed that her office has not formally received the information regarding the high court’s action.

On Monday, the government brought to the high court its plan to convert the shares into preferred shares following the announcement of San Miguel’s management that it would be offering such window of opportunity.

San Miguel has set an Aug. 21 deadline for shareholders to submit a written notice to exercise their right to convert the shares.

It was not known however if the government managed to beat the deadline. San Miguel officials were unavailable for comment.

The proposed share conversion came after the food and beverage firm announced in June that stockholders could convert their common shares, including sequestered shares, into non-voting preferred shares.

The price was set at P75 apiece, a 25% premium from recent closing values. The swap should earn an 8% per annum dividend rate.

San Miguel originally offered the exchange to pacify shareholders who are wary of the group’s recent diversification from core businesses, including the purchase of shares in utility firm Manila Electric Co. and oil company Petron Corp.

The government lawyer, speaking in behalf of PCGG, embraced the idea. It said the conversion "does not constitute a change in the condition of the assets."

An earlier ruling from the high court barred a major change in the assets pending the determination of the real owners.

The OSG has explained that although they have limited prerogatives, owners of preferred shares could still vote on certain issues, and are the first to be compensated in case of the company’s liquidation, dissolution or bankruptcy.

"When dividends are declared, cumulative dividends must be paid regardless of the year in which they are earned. Therefore, holders of the converted preferred shares are assured of accumulated annual dividends," it has said.

When San Miguel decides to redeem the shares, the proceeds could go into an escrow account, it has stressed.

In determining the merits of the proposal, the OSG however said that the high court should give credence to its being the party-in-interest in the case, and thus has a say on what to do with the assets.

The PCGG seized about 753 million San Miguel "A" and "B" shares in 1986 on suspicion that these were illegally acquired by President Ferdinand E. Marcos using levy collected from coconut farmers.

The Philippine Coconut Producers Federation, Inc. (Cocofed), which is also claiming the sequestered shares, first endorsed the share conversion, with the yield to be deposited in a trust fund for the benefit of the coconut industry.