Dennis Uy also owes $12 million to some of the country’s tycoons

Davao-based businessmen Dennis Uy may have averted a major debt default as his beleaguered holding firm Udenna Corp. said on Monday, but apparently that’s just one part of Uy’s debt story.

I learned in the past few days that his listed oil company, Phoenix Petroleum Philippines Inc., has also not been able to pay its suppliers, particularly bioethanol manufacturers – including those owned by some of the country’s biggest tycoons.

These are Gokongwei-owned URC- La Carlota, Andrew Tan-owned ProGreen AgriCorp., and Lucio Tan-owned Absolut Distillers Inc. and Asian Alcohol Corp., together with Far East Alcohol Corp. (founded by the late sugar businessman Romulo Kehyeng).  Collectively, these companies are seeking payments from Uy’s Phoenix Petroleum amounting to P646.97 million as of end April.

The P646.97 million, which does not include interest yet, is equivalent to roughly $12 million at the current exchange rate.

This amount is three times the $4 million that Udenna owed to Global Gateway Development Corp. (GGDC) and which it paid on Monday to avert a default.

The P646.97 million is for Phoenix’ bioethanol purchase – needed for the mandatory bioethanol blend for local gasoline – from these companies.

They have asked the help of the Department of Energy to address the matter.

“The bioethanol manufacturers would like to kindly bring the attention of the Bureau as regards the increasing uncollected payments from Phoenix Petroleum Philippines Inc,” the Ethanol Producers Association of the Philippines (EPAP), chaired by Gerardo Tee, said in a letter to the Department of Energy-Oil Industry Management Bureau dated May 11, 2022.

As of this writing, the outstanding payables of PPPI with the bioethanol manufacturers are as follows:

URC-La Carlota, P63.20 million, due last January 2022

Far East Alcohol Corp., P43.18 million, due last March 2022

Absolut Distillers Inc., P150 million, due last June 2021

ProGreen Balayan , P204.03 million, due last June 2021

Asian Alcohol Corp. P186.56 million, due last August 2021.

For a total amount of P646.97 million.

‘Cannot meet its obligations’

In its letter, EPAP said that due to the still unpaid sum, “the bioethanol manufacturers are constrained not to serve Phoenix Petroleum with bioethanol volumes, due to the fact it cannot meet its obligations with the bioethanol manufacturers.”

“For these reasons, may we request for the temporary exclusion from the local monthly allocation computation of Phoenix Petroleum beginning the fourth quarter of 2022. This measure will ensure that the inventories of the bioethanol manufacturers will be allocated to other oil industry participants,” EPAP said in its letter.

The Biofuels Act of 2006 mandates a 10 percent blending of bio-ethanol with gasoline to reduce the country’s dependence on imported fuels and to help protect public health and the environment.

The Department of Energy sets local monthly allocations for oil companies, which are divided among local ethanol producers. At present, the local industry can only supply roughly 50 percent of the bioethanol requirement of oil players while the rest is served by ethanol imports, which are mainly from the United States.

‘Debt is necessary’

I got in touch with lawyer Raymond Zorrilla, Udenna spokesperson and Phoenix senior vice president, to comment on Phoenix’s debt obligations.

“Debt is necessary in any business in order to expand and grow it. Just like any other company, Phoenix has its own liabilities that were incurred to fuel and propel its growth,” Atty. Zorilla said in his text message to me.

He is right in saying that debt, indeed, is necessary in growing one’s business exponentially. Nearly every company in the Philippines is doing it.

Even our government is doing it. Borrowing is not wrong, especially if the money will be re-invested or used for a company’s further growth, or in the case of the government, for social services such as health and education, which would translate to better quality of life for the people.

Problems arise when the debt isn’t paid, and together with interest, it piles up.

Moving forward, I hope that all parties involved in this issue, Phoenix Petroleum and the country’s ethanol manufacturers, arrive at a resolution that will be beneficial for all.

Nobody really wants to see a debt-saddled company collapse because if it doesn’t pay up, it brings down with it its suppliers, both big and small, its stakeholders, and depending on how big it is, possibly including the economy.

We’ve seen this happen many times in the Philippines through the years – the collapse of a bank milked by its owners; a property company which was unable to pay its debt, and many others.

At the end of the day, the pain will be felt most not by the big company owners with their fancy cars, their loud multimillion timepieces or their majestic long-haired horses. Instead, the pain will be felt by investors whose hard earned money were used to buy shares – in the case of listed companies – and most especially by the hardworking employees who stand to lose their jobs.

Iris Gonzales’ email address is [email protected].

Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com