Following a default notice from a consortium bank, shares of companies controlled by Philippine tycoon Denis Uy, a staunch supporter of former president Rodrigo Duterte, edged lower.
Leading oil firm Phoenix Petroleum Philippines loses value by almost 10% on Monday. On the flip side, shipping company Chelsea Logistics and Infrastructure holding corp slid by 16% to a record low. Overall, his company’s financial stocks dipped by nearly 2.8%, the steepest loss ever registered in a single month.
According to a statement released Monday by Udena Corp, the company had settled the debt issue to the satisfaction of the majority lender. But despite the clarification from the company, Uy-linked shares are still down during the midday break in trading.
It would be recalled that Udenna received the default notice on July 22 against affiliate Clark Global City Corp. The default notice was related to a $4 million liability for an airport lease agreement.
Reports by the Philippine Daily Inquirer show that Uy has a cross-default provision in his loan agreement, which could spill over to his other debts. As things stand, Undenna has now disputed the bank’s conclusion. Unfortunately, concerns about a broader impact on the market have pushed the Philippines benchmark stock index to slump by 1.6%, making it the worst performer in Asia.
Because of the risk that the current situation could spill over to other companies within the group, like affecting its ability to get further financing, investors are expecting a lower value for stocks, said Astro del Castillo, managing director at First Grade Finance Inc. Investors will consider Uy-linked stocks high risk until the issue is sorted out.
BDO Unibank and its protection
Meanwhile, BDO Unibank has waded in on the matter, stating that Uy’s obligations are secured, and any potential default won’t adversely affect the bank’s finances and business. Also, Undenna’s unit, Chelsea, stated in a stock exchange disclosure that its affiliates’ obligation to the Clark International Airport is due July 27. Adding that, they are working assiduously to resolve the matter on the ground before the deadline.
Following a series of deals closed during former president Duterte’s era, Udenna, a top company with investment across many industries, including oil and casino, has seen its debt skyrocket. More so, the delays in some projects and volatility in global markets have forced the firm to consider asset sales and alliances for some of its businesses.
