Udenna pays $4.8M debt, avoids default

Udenna pays US$4.8M debt before deadline to avoid default
Udenna corporate headquarters in Taguig City. Photo from Udenna website.
  • Udenna Corp. pays its US$4.8 million debt to a BDO Unibank-led consortium, avoiding a default
  • Davao businessman Dennis Uy’s holding company said it settled the account on July 25, two days before the Wednesday deadline
  • Talk of Udenna defaulting rattled the Philippine market after the lenders issued on July 22 a notice of declaration of default to its Clark subsidiary for its “continuing and irremediable events of default” relating to a master lease agreement

Davao businessman Dennis Uy’s holding company, Udenna Corp paid US$4.8 million (P274 million) to Clark International Airport Corp. (CIAC) on Monday (July 25), avoiding a default on its debt to a BDO Unibank-led consortium of banks.

The matter was settled two days before the mandated July 27 deadline “and to the satisfaction of the majority lender and the consortium banks,” Udenna said in a statement sent to media on July 26.

The bank consortium last week issued a notice of declaration of default to Udenna subsidiary Clark Global City Corp. (CGCC) for its “continuing and irremediable events of default” relating to a master lease agreement between CIAC and Global Gateway Development Corp. (GGDC).

CGCC is wholly owned by Udenna Development Corp., a subsidiary of Uy’s Udenna Corp. and an affiliate of PH Resorts Group Holdings Inc. (PHR).

“To be clear, CGCC or GGDC did not fail to make any interest or principal repayments with its debt to the consortium banks and thus, in contention, CGCC replied to the bank consortium to dispute the default conclusion and clarified that, under the circumstances, there has been, in fact, no Event of Default or, at the very least, no irremediable Event of Default, under the Master Lease Agreement on the part of CGCC or GGDC,” Udenna said in a statement.

Other listed companies owned by Uy, such as PH Resorts, DITO CME Holdings Corp., Phoenix Petroleum Philippines Inc. and Chelsea Logistics and Infrastructure Holdings Corp., said in separate disclosures to the Philippine Stock Exchange that the issue won’t affect their respective businesses, financial conditions, and operations.

Udenna’s aggressive expansion, which accelerated in 2017, has led to its huge debt as it grew its portfolio to some 55 companies, from less than half that number in 2015. At least 10 of them were incorporated or already operating in 2017.

The group’s portfolio includes distribution and retail of finished petroleum products through Phoenix Petroleum; gaming and tourism through PH Resorts; and telecommunications through DITO CME.

BDO assured its stakeholders that its loan exposure to CGCC is secured from a possible default. It confirmed in a disclosure to the stock exchange that it had issued a notice of default to CGCC in relation to its obligations under the lease agreement between CIAC and GGDC.

“The relevant obligations of CGCC to BDO are secured and a default will not have a material adverse effect on the financial condition and business of BDO,” the bank said.

Bangko Sentral ng Pilipinas Governor Felipe Medalla had said earlier the regulator’s stress tests indicate that the Philippine banking sector has adequate capital even under difficult scenarios.

“The banking sector is quite strong,” Medalla said. He said the total exposure of BSP-supervised financial institutions (BSFIs) to the Udenna Group accounts for 0.83% of the total loan portfolio and 0.45% of the total assets of Philippine banks.