In Debt Look: What Happened to BDO and Dennis Uy’s Shares?
With only a matter of days to settle his debt with BDO Unibank, Dennis Uy is in a pinch. But what exactly happened to both companies after?
The business world was taken by surprise when news of Dennis Uy’s holding firm Udenna Corp. faced threats of foreclosure for its outstanding loans from one of the country’s largest lenders: BDO Unibank. After all, BDO was hit hard, since it is one of the banks that was most exposed to the Davao businessman’s growing debt.
With Uy acquiring an unprecedented number of businesses—including a controlling stake in the Malampaya Project—his expenses grew. Thus, BDO sent a notice of declaration of default to Udenna Corp on July 22 for the PHP 225 million outstanding loan on a long-term lease agreement between Udenna’s subsidiary, Global Gateway Development Corp (GGDC), and the state-run Clark International Airport Corp. (CIAC).
The report from Inquirer adds that BDO sent the notice to Udenna in hopes of getting Uy to “agree to an orderly settlement.” What’s more, the notice gave him until Tuesday, July 26 to pay—putting the businessman in a tight situation.
Notice of Default, Explained
But what does this mean for the Davao-based businessman? Simply put, if Uy fails to make timely payments, the loan could be in default. This means that the asset or collateral used to secure it could be taken from him.
Worse, an Udenna default on one loan could snowball into additional defaults across its other loans—including loans that Udenna is paying in a timely fashion due to possible “cross default” provisions. This is defined as a contractual term that allows a bank to “interpret a company’s default on a loan (Loan A) as an event of default on another loan (Loan B)—even if the company is otherwise in compliance with the terms of Loan A.”
Paid or Not Paid?
With a PHP 254 million debt shouldered by Udenna as of December 31, 2020, things aren’t looking too good for him. What’s more, Uy’s listed oil company, Phoenix Petroleum Philippines Inc. owes a collective amount of PHP 646.97 million as of the end of April to its suppliers—including those owned by some of the country’s biggest tycoons.
These include Gokongwei-owned URC-La Carlota, Andrew Tan-owned ProGreen AgriCorp., Lucio Tan-owned Absolut Distillers Inc. and Asian Alcohol Corp., together with Far East Alcohol Corp. (founded by the late sugar businessman Romulo Kehyeng).
However, Uy is not one to back down without a fight. Amid threats to pay his dues by Tuesday, he retaliated by saying that if his company were in default, then the default is something that can be resolved under the terms of the debt agreement without the need for foreclosure.
Uy further adds in a statement on Monday that Udenna has not missed any principal or interest payment to the bank syndicate led by BDO. Likewise, it stressed that its payment issues were strictly with CIAC—which it settled before the July 27 due date.
BDO and Dennis Uy: In a Precarious Position?
While BDO’s stocks have been erratic to start with, its stocks plunged by 4.62% (PHP 115.60) on Monday as investors were worried about the state of Uy’s debt-laden business empire. That same day, BDO was the most traded stock as it accounted for nearly a quarter of total trades—reaching a whopping PHP 904 billion worth of volume.
Following the plunge, BDO reassured investors that Udenna’s loans to the bank were “secured” and added that any default will not drastically affect the bank itself. Whether this helped ease their worries or not, the stock price righted itself from July 27 onwards, as BDO’s stock price steadily went back up.
Meanwhile, Uy’s stocks dominated the list as the top 3 worst stocks on Monday, with the biggest loser being Phoenix Petroleum Preferred (PNX4), which reached an all-time low of PHP 800 before closing at PHP 815—going down 16% on PHP 19 million worth of trades.
Other Uy-owned businesses that took it hard include Chelsea Logistics Holdings with a historic low of PHP 1.07 before closing at PHP 1.12—down 11.81% on PHP 5.32 million turnover—and DITO Telecommunity, which lost 3.43% to PHP 3.94 on PHP 64 million turnover.
That same day, Udenna announced that it had settled its dues to the state-owned Clark International Corp.—the company’s landlord for the 177-hectare Clark Global City project that Uy took over last 2017. With that, the market closed on a good note for Chelsea Logistics Holdings as it climbed back up to PHP 1.19 with a 0.85% increase as of July 29. Phoenix Petroleum Preferred, however, still continues to drop—going even lower at PHP 794.00 (-0.75%).