MANILA - The Presidential Commission on Good Government (PCGG), through the Office of the Solicitor General (OSG), has sought permission from the Supreme Court to convert into preferred shares some 27.57 million common shares in San Miguel Corp. being held in trust for the Comprehensive Agrarian Reform Program (CARP).

The move came after the SC approved the conversion of the government's sequestered shares in SMC, representing 24% of the diversified conglomerate, under the names of the Coconut Industry Investment Fund (CIIF) and its holding companies.

In an 8-page urgent motion, Justice Secretary and concurrent Solicitor General Agnes Devanadera stressed that the subject shares of the PCGG Industry Trust Fund-CARP, including the qualifying shares issued to PCGG nominee-directors, "are also affected by the same circumstances and conditions as the CIIF SMC common shares, therefore, would also share the same benefits and advantages when converted from common shares into preferred shares."

In a resolution issued last September 2, the PCGG asked the OSG to file a motion with the high court for the conversion, not only of the CIIF class "A" and "B" SMC common shares, but also the PCGG ITF-CARP shares.

The SC, in a decision issued on September 17, affirmed the position of the OSG that the market value of the sequestered shares would continue to depreciate if their conversion into preferred shares would not be allowed.

SMC "A" shares, according to the court, were only trading at P48 in 2008 compared to P65 in 2006. The "B" shares, on the other hand, fetched a price of P49 per share last year versus P74.50 in 2006.

In general, the SC ruled that the conversion "is advantageous to the public interest" as it would preserve the value of the sequestered shares in light to the recent global economic crisis.

The court agreed with the OSG that the conversion would result to a higher dividend rate of 8% per annum, which would translate to P6 per preferred share or a guaranteed yearly dividend of P4.523 billion for the entire sequestered shares as compared to the dividends for common shares for the past years which only reached P1.055 billion per year with P1.40 per unit share.

The conversion, according to high court, is also necessary to allow stockholders who are doubtful of SMC's expansion into regulated and potentially high-growth businesses reduce exposure to risk.

SMC has been diversifying from its food and beverage business into power, telecommunications, and infrastructure, among others. It has acquired shares in the Manila Electric Co. and in Liberty Telecom, and wants to venture into the Laiban Dam project.