Philippines tycoon, Duterte’s ally’s stocks tumble on default notice from banks

·3-min read
Dennis Uy, chairman and president of Phoenix Petroleum Holdings Inc., speaks during a Bloomberg round-table discussion in Manila, the Philippines, on Monday, March 5, 2018. Surprised by the rapid acceleration of Philippine inflation in January to a three-year high, economists will be closely studying the February data as they anticipate more price gains.
Dennis Uy, chairman and president of Phoenix Petroleum Holdings Inc., speaks during a Bloomberg round-table discussion in Manila, the Philippines, on Monday, March 5, 2018. Surprised by the rapid acceleration of Philippine inflation in January to a three-year high, economists will be closely studying the February data as they anticipate more price gains.

By Ian Sayson and Cecilia Yap

Shares of companies controlled by Philippine businessman Dennis Uy, a supporter of former President Rodrigo Duterte, slumped after one of his units received a default notice from a consortium of banks.

Oil firm Phoenix Petroleum Philippines Inc. slid as much as 10% Monday, while shipping company Chelsea Logistics & Infrastructure Holdings Corp. plunged 16% to a record low. A gauge of financial stocks dropped as much as 2.8%, the steepest loss in a month.

Udenna Corp. said in a statement on Monday that the company had settled the debt issue “to the satisfaction of the majority lender” and a group of banks led by BDO Unibank Inc., the country’s biggest lender. Uy-linked shares were still down during the midday break in trading.

Udenna received a default notice on July 22 against affiliate Clark Global City Corp. in relation to a $4 million liability involving an airport lease agreement. The Philippine Daily Inquirer reported that Uy has cross default provisions in his loan agreements, which risks a spillover to his other debts.

Over the weekend, Udenna disputed the banks’ conclusion. By Monday, concerns about a broader impact to markets led to a 1.6% drop in the Philippines’ benchmark stock index, which is already the worst performer in Asia.

“Investors are seeing a lower value for the stocks because of the risk this could spread to other companies within the group and affect its ability to raise financing,” said Astro del Castillo, managing director at First Grade Finance Inc. He added that Uy-linked stocks will be considered “high risk” until the issue is revolved.

On Monday, BDO Unibank said Uy’s obligations were secured and that a potential default won’t have a material adverse effect on the bank’s financial condition and business. In a stock exchange disclosure on the same day, Udenna’s unit Chelsea said its affiliates’ obligations to the Clark International Airport are due on July 27 and that they are working to resolve the matter before the deadline.

Still, that did little to ease worries. Other units that saw heavy losses included Dito CME Holdings Corp., a venture with China Telecommunications Corp., which plunged as much as 9.1%. PH Resorts Group Holdings Inc. slumped 7.5% before paring losses by about half.

Udenna, a conglomerate with investments in everything from oil to casinos, has seen its debt grow following a series of deals made during Duterte’s six-year term. Following volatility in global markets and delays in some projects, the firm said in May that it was exploring asset sales and alliances for some of its businesses. Uy also put on hold a project to develop the nation’s only operating gas field amid a government probe.

Udenna had total liabilities of 254.5 billion pesos ($4.5 billion) as of end-2020, according to its annual report filed with the Securities and Exchange Commission.

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