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Republic of the Philippines Wry TIMES,
HOUSE OF REPRESENTATIVES =
QUEZON CITY

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL no.689 9

Introduced by: HON. JOHN REYNALD M. TIANGCO

EXPLANATORY NOTE

The pandemic has put economic activities to a complete standstill across different
sectors, Thus, focus should be on greater efforts to advance local government initiatives and
policies that will help lift growth in the coming years.

This bill seeks to strengthen expansionary monetary and fiscal policies to reinforce
the financial capacity of local governments to provide programs to its constituents, Under
the Bayanihan Law, all banks, including quasi-banks, nonstock savings and loan associations,
credit card issuers and pawnshops including financial institutions under the Bangko Sentral
ng Pilipinas, Securities and Exchange Commission, Cooperative
Development Authority, Government Service Insurance System, Social Security System and
Pag-IBIG, are mandated to offer a 30-day grace period for the fulfillment of loan payments
with due dates that fall within the enhanced community quarantine period. Following the
lead of the Bayanihan Law and the directive of President Rodrigo R. Duterte to alleviate the
burden of Filipinos during this pandemic, the main scope of the bill is to specifically provide
moratorium on credit facilities granted to local government units by covered credit and
financial institutions.

For the promotion of local government policies and efforts to battle the pandemic,
and to supplement assistance to local government units, the passage of this bill is earnestly

sought.

Bishotaisiirinptco

”


Republic of the Philippines
HOUSE OF REPRESENTATIVES
QUEZON CITY
EIGHTEENTH CONGRESS
First Regular Session

9
HOUSE BILL NO. ssS 9

Introduced by: HON. JOHN REYNALD M. TIANGCO

AN ACT REGULATING THE SCOPE OF A LOAN MORATORIUM ON CREDIT FACILITIES
GRANTED TO LOCAL GOVERNMENT UNITS

Section 1. Short Title - The Act shall be known as “The LGU Loan Moratorium Act of 2020.”

Section 2, Declaration of Policy - It shall be the policy of the State to bolster the resumption
of economic growth of local government units. Following the passage of Republic Act No.
11469 otherwise known as the “Bayanihan to Heal as One Act,” this Act aims to alleviate the
debt-burden oflocal government units in order to help them address the immediate financial
and economic concerns of their localities. This Act also aims to provide local government
units a reasonable period within which to meet their credit obligations through the
implementation of various mechanisms instituting deferment of payment of loan
amortization due within any community quarantine period, premised upon redirecting
budget for loan payments into social amelioration programs.

Pursuant to the Congressional mandate to extend the nationwide moratorium under the
Bayanihan to Heal as One Act on loan payments, this Act requires institutions to implement
a two (2)-year grace period for all loans incurred by local government units with principal
and/or interest falling due within any community quarantine period “without incurring
interest on interest, penalties, fees and other charges.”

Section 3. Definition of Terms
(a) __ Debtor/s - Qualified local government units with existing loans granted

by government-owned or -controlled corporations incurring interests and
penalties;

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(b) Greditor/s - Government-owned or -controlled corporations and
financial institutions.

( _Loan/s - debt instruments, loan contracts or credit facilities incurred
before the community quarantine, with payments falling within any declared
community quarantine period, including any document or instrument for,
used in connection with, or related to:

i. Any obligation to pay the principal of, premium of, if any, interest on,
penalties, reimbursement or indemnification amounts, fees, expenses,
or other amounts relating to any indebtedness, and any other liability,
contingent or otherwise,

1. For borrowed money;

2. Evidenced by bonds, debentures, indentures, notes, resolutions,
credit agreements, trade finance agreements, trade finance
facility agreements, securities, or similar instruments; or

3. for any letter of credit or performance bond; ii. Any contingent
obligation in respect of or related to any liability of the kind
described in the preceding paragraph, including, but not limited
to, any guaranty of such liability and any reimbursement
agreement in respect of an insurance policy covering such
liability;

ili, Any obligation in respect of bankers’ acceptances; iv. Any obligation

in respect of a swap agreement, derivative contract or related agreement,

hedge agreement, securities contract, forward contract, repurchase

agreement, option, warrant, commodities contract, or similar document;

v.Any and all deferrals, renewals, extensions, and refunding of, or
amendments, modifications, or supplements to, any liability of the kind
described in (i) through (iv);

vi. Any liability arising out of any judgment relating to any liability
ofthe kind described in (i) through (v); or
vii, Any liability arising from an obligation of insurance relating to

any liability of a kind described in this section.
Provided that the following are not covered:

i. Debtors in default for more than thirty (30) days before any
declared community quarantine period, in respect of any
payment under a loan;

ii. Loans related to trading in investment instruments; iii.
Investment instruments; iv. Financial guarantees; and v.
Deferred payments;


vi. Loans for continuous provision of services and goods, for which
paymentis in installments; and vii, Revolving or overdraft facilities.

(qd) Moratorium - a two (2) year grace period or imposed deferment of Loan
payment due within any declared community quarantine period.

Section 4. Suspension of enforcement proceedings. During the Moratorium, no act shall be
done, and no action or proceeding, including issuance of process, shall be commenced or
continued in any court in any jurisdiction, which could result in the recovery from, or
judgment or enforcement against such government entity related to any covered obligation,
or any funds, property, receivables or revenues thereof; any order, judgment, lien, set-off,
right of attachment or counterclaim related to any covered obligation against such
government entity, or the indebtedness or liability evidenced thereby; or the application of
any funds, property, receivable or revenues of such governmenteentity related to any covered
obligation of such government entity, or the indebtedness or liability evidenced thereby.

Section 5. During the Moratorium, no creditor asserting claims or other rights, no trustee, no
insurer, and no financial institution that receives or holds funds from such creditor may
exercise any remedy, which remedy shall include any right of acceleration or termination,
right of set-off, right of attachment or counterclaim related to any covered obligation of such
debtor, under any contract or applicable law asa result of:

a. Non-payment of any obligation arising under or related to any covered obligation
of such government entity;

b. Breach of any condition or covenant under or related to any covered obligation of
such government entity;

. The accrual of any right that is conditioned upon the financial condition of, or the
commencement of a restructuring, insolvency, bankruptcy, or other proceeding,
including a default or an event of default thereunder; or

d. The effectivity of this Act or any similar legislation, including other moratorium
legislation.

Section 6. During the Moratorium, no contract to which the debtor is a party may be
terminated or modified, nor may any right or obligation under such contract be terminated
or modified solely because of a provision in such contract conditioned on:

The insolvency or financial condition of such government enti
The commencement ofa restructuring, insolvency, bankruptcy, or

Other proceeding, or a moratorium by such government entity; or

A default under a separate contract that is due to, triggered by; or as

The result of the occurrence of the events or matters in the previous subsections.

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Section 7. Opt in. The notification will be submitted to the creditor with an affidavit that the
local government unit intends to make use of the Moratorium due to negative economic
impacts of the pandemic. The deferral effect will only benefit local government units that can
demonstrate in their notifications, the following:

i. That they have lost revenue due to the exceptional circumstances resulting
from the spread of the Covid-19 pandemic;

ii, They can no longer reasonably be expected to honor their contractual
commitments as a result of this loss of income. In assessing such reasonableness, a
case-by-case consideration is required; and ill. The scope of application of the law
may be extended by statutory order to other groups of debtors and creditors,
including in particular SMEs.

Section 8, Implementing Rules and Regulations - Within ninety (90) days after this Act
takes effect, the Department of Finance, in consultation and coordination with appropriate
government agencies, representatives from the private sector, and other stakeholders, shall
promulgate the necessary implementing rules and regulations for the effective
implementation of this Act.

Section 9. Separability Clause - In the event any provision of this Act or the application of
such provision to any person or circumstances is declared invalid, the remainder of this Act
or the application of said provisions to other persons or circumstances shall not be affected
by such declaration.

Section 10. Repealing clause - All acts and regulations not consistent with this Act are
hereby amended or repealed.
Section 11. Effectivity - This Act shall take effect fifteen (15) days after its publication in at

least two (2) national newspapers of general circulation.

Approved,