MANILA - Dennis Uy has a lot of debt.

The Davao-based businessman, who was a major contributor to President Rodrigo Duterte's 2016 campaign, bought a lot of companies during Duterte's term. But in the process, he also racked up a long list of debts.

• Petrol, cakes and telecoms: Dennis Uy's business expansion continues

Just adding up the total liabilities of his listed companies DITO CME, Phoenix Petroleum, Chelsea Logistics, and Philippine Resorts Group Holdings puts his debt level at P287.86 billion as of the end of June 2022. These are just the listed companies, which also happen to have posted a combined net loss of P9.758 billion in the first half of this year.

Uy has also been serenaded with letters demanding payment.

There was a reported declaration of default involving $4 million or around P236 million in debt owed to a consortium of banks related to Uy’s Clark Global City corporation in July. Uy later announced he had settled this issue.

But there was also the P646.97 million owed to ethanol suppliers by Uy’s Phoenix Petroleum, reported in July.

In August Globe also asked the National Telecommunications Commission to require payment of P622 million from Uy’s DITO Telecommunity for allegedly violating an interconnection agreement.

Last month, Smart also announced Uy’s DITO Telecommunity owed it P430 million for contracted services related to the building of transmission facilities for the interconnection of DITO and Smart subscribers.

Eduardo Francisco, President of BDO Capital, has worked with Uy on numerous occasions. He was the underwriter for Chelsea’s P5.8 billion Initial Public Offering in 2017 and Phoenix’s P355 million IPO in 2007, both at the Philippine Stock Exchange.

Apart from that, Francisco is a long-time colleague and friend of Raymundo Martin Escalona, the current President of Uy’s holding company Udenna Corporation.

Francisco said Udenna was a victim of the COVID-19 pandemic.

"A lot of their activities, businesses, were consumption-driven. Because of the lockdowns, people bought less gasoline, and Phoenix got hit. Even the resorts got hit. Even what happened with Chelsea and their Clark projects, the rollouts of real estate slowed down,” said Francisco.

But he added that Uy and Escalona have not been sitting idly while all of this has been happening.

"They are aware of some of the challenges. They have been trying to fix it.”

He said Uy’s group has been talking to potential investors for several years already, but issues about valuation and control got in the way.

“Because in fairness also, pinaghirapan nila ito [they worked hard for this], so why would they want to give it up quickly? Why would they sell it for a song?”

Uy, however, did sell Udenna’s interests in the Malampaya Gas Field to Enrique Razon, as well as PH Resorts casinos in Lapu-Lapu City and Clark, Pampanga.

• Razon's Prime Infra completes acquisition of Malampaya operator
• Razon's Bloomberry to invest in Dennis Uy's PH Resorts group projects

On Wednesday, Reuters also reported that Uy’s Udenna Corp was looking to sell its food assets, namely Conti’s Bakeshop and Restaurant, and Wendy’s fast-food chain. Citing sources, Reuters said the deal could fetch as much as $200 million for Udenna.

For his part, Francisco said there are more deals in the works.

"I know of deals that are of interest from several parties in some of the businesses, not all of them. Of course, it is too early to tell, because of confidentiality we cannot disclose it until it is properly disclosed. But these deals, there are deals there.”

Life after debt for Uy?

Ultimately, Francisco said Uy has enough assets to get around his debt woes.

He also noted that even in the unlikely event that Uy decided to simply give up and default on all of his debts, it wouldn’t be big a problem for the banking industry.

“At least it is good to say what our various chiefs of Finance have been saying: The banking industry now is in a safer position. We are well capitalized, and the total Dennis Uy exposure to the banking industry is less than 1 percent.”

Francisco said parts of Uy’s business empire will be sold off well before that ever happens.

He said other attractive assets that may be of interest to buyers include Phoenix Petroleum, Enderun Colleges, and Clark Global City.

But he sees DITO Telecommunity and PH Resorts being kept in Uy’s portfolio thanks to partners China Telecom and Bloomberry Resorts. Francisco said it is possible for Uy to sell DITO once it has more subscribers.

Matthew Cabangon, President at AAA Securities, however also pointed out that these potential deals could end up being very painful for shareholders of Uy’s listed companies.

"We’ve seen the Dennis Uy listed companies go down in price a lot. I think that is natural given the concerns around the conglomerate’s debt. In terms who of who gets paid first, in the event of a credit event, naturally, it's the banks and the lenders. They are typically collateralized while equity holders and preferred shareholders are not collateralized,” Cabangon said.

He warned that if something negative comes out of these debt concerns, equity holders and preferred shareholders are going to be put in the worst position out of all of the investors involved.

Cabangon also said that while it is clear to everyone that Uy has debt problems, it is still unclear how big the problem is.

“I think that is a pretty tough call to be making, given how much of this is unlisted and it is overall a very opaque situation. I wouldn’t be so bold as to say that these are all independent events. I think it is very likely that things are interconnected.”

His advice to investors is to stay on the safe side.

"As far as Dennis Uy listed firms, I think that is a pretty easy call to make to stay away from those. Especially given how rising rates can negatively impact the debt burden of those companies.”

However, for investors who have the stomach for it, Cabangon said there might be some opportunity provided Uy is able to orchestrate more deals like the one he agreed to with Razon for PH Resorts.

"There was a price bump [for the stock] when it was announced. I think that is the sort of thing that we can be seeing with any of the listed companies with these white knights coming in. So I am not terribly pessimistic," Cabangon said.

DITO in the crosshairs?

Cabangon also believes DITO Telecommunity is one of the more attractive assets of the Dennis Uy group.

“One of the large ones that people are looking at is DITO Telecom. That is a very prized license. Now I think the big question mark there is China Telecom. As a big partner, they could backstop a lot of these problems. But I am sure there are a lot of players looking at those assets.”

Cabangon said DITO Telecommunity’s competitors are certainly interested. However, he said there are a lot of unknowns surrounding a possible acquisition, especially since DITO Telecommunity is not listed directly on the Philippine Stock Exchange. It is only a part of the assets of Uy’s listed DITO CME.

“I think the entrenched players certainly are studying that, that is without a doubt. Whether or not it materializes, I think a lot of other things need to happen first around all these debt concerns.”

Because DITO is unlisted, it is hard to see how big the third telco’s liabilities are, and how much the sister companies are lending to each other, he said.

“I think that makes the overall situation harder to judge.”

ABS-CBN reached out to Udenna’s Escalona for a statement on these matters. He declined to comment.

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