Dennis Uy’s Udenna challenges default
MANILA, Philippines — Davao-based tycoon Dennis A. Uy’s Udenna Corp. is set to settle the debts of its $6 billion Clark Global City project after receiving a foreclosure notice from a consortium of banks led by BDO Unibank Inc., the nation’s largest lender.
On Saturday, Uy’s unlisted holding company confirmed a report by the Inquirer that it received a notice of default on July 22, adding that it disputes the findings.
If formalized, the notice could trigger a cascade of defaults from other group liabilities to make it the largest default in Philippine corporate history.
Udenna said the default was issued against subsidiary Clark Global City Corp., which is developing the 177-hectare Clark Global City in the Clark Freeport area of Pampanga.
Udenna, citing the notice of default, said it involved “continuing and irremediable instances of default” in connection with a long-term lease agreement between state-owned Clark International Airport Corp. (CIAC) and Global Gateway Development Corp. (GGDC).
GGDC holds the leasehold rights to the property complex. It was acquired by Clark Global City Corp. in 2017.
“GGDC and CIAC are working on an amicable resolution that will not result in any breach of the master lease agreement,” Udenna said in the statement.
In the meantime, the company said it had responded to the banks to “challenge their conclusion” which triggered the declaration of default.
“In these circumstances, there has been, in effect, no event of default, or at the very least, no event of irremediable default, under the head lease agreement on the part of CGCC or GGDC,” said Udenna.
The issue concerned the failure of the Uy companies to make payments to CIAC. The Inquirer reported that the current debt stood at $4 million (225 million pesos), but banking sources also raised concerns about increased liabilities that could be triggered by so-called default provisions. cross.
Udenna’s liabilities at the end of 2020 stood at more than 254 billion pesos against total assets of 310.34 billion pesos, according to a regulatory filing.
Losses for the year more than doubled to 8.6 billion pesos given the slowdown in business caused by the arrival of the COVID-19 pandemic.
Cross-default clauses, which are common practice when structuring corporate loans, make an event of default by a borrower, regardless of size, legally default on all of its other debts.
A default of this magnitude would be the largest of a private loan in local history, eclipsing loans downgraded in 2019 from Subic-based Hanjin Shipyards with $412 million, or 23 billion pesos at the rate of changes in effect.
Banking sources said Uy had until July 26 to respond favorably to the advice of BDO, which leads a syndicate of banks exposed to its six-year debt-fueled corporate buying spree.
An official with direct knowledge of the matter said BDO’s intention in serving the foreclosure notice was not to seize Uy’s assets, but to force the businessman to come to the table negotiations.
“Foreclosure is not the preferred option,” the official said. “The situation can be corrected if they are ready to work with the banks.”
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