The Bangko Sentral ng Pilipinas (BSP) has downplayed the impact of a possible loan default of big borrower Udenna Group of Davao-based businessman Dennis Uy on the banking system, saying the involved banks such as BDO Unibank Inc. can take care of it.
BSP officials on Saturday, July 23, said all of the BSP supervised financial institutions (BSFIs) that loaned the money to Udenna are well-capitalized and are liquid banks. These banks are also capable of absorbing potential losses in case of loan default.
“From most recent data, the aggregate exposure of the BSFIs to Udenna Group was minimal at 0.83 percent and 0.45 percent of the total loan portfolio and total assets of the Philippine banking system, respectively,” according to BSP Governor Felipe M. Medalla.
These figures are as of March 31. Compared to end-December data, the bank proper exposures to Udenna even declined since in Dec. 31, 2021, the consortium banks’ total loan to Udenna was 0.9 percent of industry portfolio and 0.5 percent of total system borrowings, said BSP Deputy Governor Chuchi G. Fonacier, who heads the banking supervision unit in the central bank.
“Capital levels of the lending banks remain sufficient to absorb possible losses arising from loan exposure to Udenna Group,” said Fonacier.
In an official statement on Saturday in response to a Philippine Daily Inquirer report, Udenna said it received a “Notice of Declaration of Default” from a consortium of banks led by BDO as majority lender against Clark Global City Corp. (CGDC) which is developing a $5-billion Clark Global City project.
Udenna said the default issuance was on grounds of “continuing and irremediable events of default” as per BDO. This is with regard to the Master Lease Agreement between Clark International Airport Corp. (CIAC) and Global Gateway Development Corp. (GGDC).
Udenna clarified that it has communicated with the BDO-led consortium of banks and that it is disputing their conclusion.
It said that under the circumstances, “there has been in fact no event of default or at the very least, no irremediable event of default” under the lease agreement on the part of CGDC of GGDC.
“GGDC and CIAC are working on an amicable resolution that will not result to any violation under the Master Lease Agreement,” said Udenna. “We trust that we have been able to clearly state our position on the matter,” it added in its statement.