Aug. 1--The Department of Finance is partial to swapping the government's common shares in San Miguel Corp. (SMC) for preferred shares, which will earn higher dividends.

Finance Undersecretary Crisanta Legaspi said the government will earn more if it converted its 24-percent SMC interest from common to preferred, adding that the move would prevent further losses brought about by the continued decline in the value of its stake in Southeast Asia's largest food and beverage firm owing to the global financial crunch.

The Finance department earlier admitted that the value of the share is now P21 billion, down from the original P54 billion.

"In terms of dividends mas malaki ang kita ng government, kasi fixed income ang preferred stock. Pero dahil ito ay sequestered account hindi pa magagamit ng government ang kita, kasi meron pa itong pending case sa court. It has to be cleared. It has to be surrendered," Legaspi said.

Last month, the government through the Office of the Solicitor General (OSG), sought the approval of the Supreme Court to sell its 24-percent stake in SMC.

The government shares include 446,452,536 San Miguel "A" shares and 307,395,776 "B" shares. It is registered to the Coconut Industry Investment Fund (CIIF) and controlled by the government.

The OSG had said it is "undisputed that there has been a substantial depreciation in the stock market prices of said shares and one way by which the value of said shares may be preserved is their immediate sale at a premium price and the proceeds of which shall be deposited in an escrow account."

Legaspi said the government will use the proceeds of the sale for the interest of the coconut farmers and coconut industry.

The SMC shares belonged to 14 holding companies under the CIIF, namely, ASC Investors Inc., ARC Investors Inc., Toda Holdings Inc., Te Deum Resources Inc., Rock Steel Resources Inc., San Miguel Officers Corps Inc., Roxas Shares Inc., AP Holdings Inc., Valhalla Properties Limited Inc., Soriano Shares Inc., Randy Allied Ventures Inc., Anglo Ventures Corp., First Meridian Development Inc. and Fernandez Holdings Inc.

Proceeds of the sale will be deposited to the Development Bank of the Philippines or to the Land Bank of the Philippines under the account of the CIIF.

After the end of each fiscal year, 40 percent of the net earnings of the proceeds would be disbursed to the LandBank for reinvestment to prevent the dissipation of the principal amount, and 20 percent to state-run Philippine Coconut Authority (PCA) for the benefit of farmers.

Another 20 percent would go to the Philippine Coconut Producers Federation Inc. representing about a million farmers for socioeconomic programs and projects, and 20 percent would go to other PCA-accredited coconut farmers' groups.

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