Stock Commentary

BDO sends notice of declaration of default to Udenna

Merkado Barkada
Mr. Uy’s recent behavior suggests that his new empire is indeed struggling for cash, as he’s in the process of selling off portions of his portfolio to Enrique Razon for cash.
Merkado Barkada

BDO [BDO 121.20 0.17%] [link], the country’s largest lender, sent a notice of declaration of default to Udenna Corp on July 22, in connection with the P225 million outstanding on a long-term lease agreement between Udenna subsidiary, Global Gateway Development Corp (GGDC), and the state-run Clark International Airport Corp. (CIAC).

According to Inquirer reporting, BDO sent the notice to Udenna in an attempt to get Dennis Uy to the negotiation table, to “agree to an orderly settlement”. The notice gives Dennis Uy until July 26 (Tuesday) to pay. BDO is the bank which is most exposed to the mountain of debt that Dennis Uy has accumulated during his Duterte administration-backed buying spree that saw the Davao man acquire an unprecedented number of businesses, including a controlling stake in the Malampaya Project.

Udenna responded to the notice by saying that it “disputes” the banks’ conclusion that it was in default, and that if it is in default, the default is something that can be resolved (under the terms of the debt agreements) without foreclosure. Udenna had P254 billion in debt as of December 31, 2020. A Udenna default on one loan could trigger a cascade of additional defaults across its other loans, even loans that Udenna is paying in a timely fashion, due to possible “cross default” provisions. A cross default provision is a contractual term that allows a bank to interpret a company’s default on a loan (Loan A) as an event of default on some other loan (Loan B), even if the company is otherwise in compliance with the terms of Loan A.


Dennis Uy has been swimming in the deep end for a while now, but it will be interesting to see how he negotiates this latest challenge now that his water wings are no longer in government pulling strings on his behalf. Mr. Uy’s recent behavior suggests that his new empire is indeed struggling for cash, as he’s in the process of selling off portions of his portfolio to Enrique Razon for cash.

While Udenna is a private company that is not traded on the PSE, many of Udenna’s subsidiaries are actually traded on the PSE, like Phoenix Petroleum [PNX 9.78 1.24%]DITO CME [DITO 4.08 1.21%]Chelsea Logistics [C 1.27 1.60%], and PH Resorts [PHR 0.80 1.23%]. A Udenna default might have a material impact on Udenna’s ability to optimize the potential operation of those companies going forward. Most of those in the local business community that I spoke with doubted Mr. Uy’s ability to even carry his empire through 2020, so the fact that he’s made it this far is somewhat impressive, in a “kids, don’t try this at home” kind of way. No need for me to speculate too much about what will happen. If this were you or me, this would be a mechanical process with a very different outcome. But this is now a negotiation between billionaires. Anything can happen when the numbers have a few extra zeros.



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