Filipino shipping tycoon Dennis Uy will sell crown jewels
Dennis Uy has taken billions in loans – including more than $1 billion from Chinese banks to fund a partnership deal with China Telecommunications – and now the shipping and energy magnate’s ship is sinking.
By Ian Sayson (Bloomberg) Filipino tycoon Dennis Uy’s conglomerate is ready to part with its crown jewels as part of an asset sale plan to pay off debt after its aggressive oil-to-casino expansion.
Discussions are underway and should be concluded in the coming months, according to the president of the holding udenna, who joined Uy for an interview with Bloomberg this week. The leaders of several units, including Chelsea Logistics & Infrastructure Holdings and Phoenix Petroleum Philippines, were also present. Although the preference is for debt reduction without handing over the majority of Phoenix and Chelsea, the group is open to offers.
Udenna would like to keep his crown jewels, but will not resist an attractive offer if it helps reduce debt further, chairman Martin Escalona has said.
The asset sale plan follows years of credit-fueled expansion by Udenna, including a foray into real estate and casinos, a telecommunications company, as well as investments in a platform operator gas station and a culinary school. The Davao City-based business empire made headlines in July after one of its units received a Notice of Default from creditors, which Escalona says caused him to skip dinner when he found out on a Friday night. He called it a “misunderstanding” and Udenna said the matter was now settled.
Executives declined to give a figure for the group’s total debt, but publicly available documents provide details of its borrowings. Mobile phone operator DITO Telecommunity, Uy’s venture with China Telecommunications, has taken out more than $1 billion in loans from Chinese banks, according to figures released this month. Udenna’s latest report shows a debt of 180 billion pesos ($3.21 billion) at the end of 2020.
“We know how to sell and we know how to buy,” Uy said. “If some of our assets are attractive, and that makes sense, then we rationalize, but again, it’s not easy because everyone is part of the family.”
Creditors have been supportive, Escalona said, adding that the group plans to sign an expected $4.1 billion loan by November for DITO Telecom’s network rollout.
Shares of DITO CME Holdings, parent company of DITO Tel, rose 1.3% on Friday. The overall market increased by 0.7%.
Right the ship
Uy, 48, said any decision to sell assets was emotional for him as the business is responsible for thousands of families.
“We should have raised equity, which we had planned in 2020, but we decided that debt is cheaper,” Uy said, adding that he should have used strategic partners.
The conglomerate has already started offloading assets, selling a stake in its casino businesses to billionaire Enrique Razon, who is also acquiring a stake in a offshore gas project where Uy has an investment. Last year, Chelsea sold its entire stake in a shipping company called 2GO.
Uy, which has made a name for itself in the oil business, launched its expansion and deal spree after the 2016 election of former president Rodrigo Duterte. Both are from Davao City in the southern island of Mindanao. The shipping and energy mogul, who helped campaign Duterte and counts the leader as a friend of the family, defended his aggressive expansion in a 2017 interview, saying he believed in Duterte’s economic program. In recent years, he has amassed assets that have eaten away at industries run by the country’s wealthiest families.
“We grew too quickly in the past, and the only reason we did that was because there was a very strong belief that the economy was going to get better,” Escalona said.
The onslaught of the pandemic and the group’s indebtedness have increased the risks of insolvency for companies in Uy. A measure of bankruptcy risk, known as the Altman-Z score, for four companies owned by the businessman shows higher risks than the average of the MSCI Philippines index, which is already the worst in Southeast Asia, according to data compiled by Bloomberg.
“Of course, we are injured. Who else isn’t? Uy said. “We’re doing it right, righting the ship.”
By Ian Sayson, Harry Suhartono and Andreo Calonzo with help from Cecilia Yap.© 2022 Bloomberg LP