MANILA, Philippines (Updated 4:21 p.m.) — Davao-based businessman Dennis Uy is asking the Duterte government for guarantees to cover a P700-million loan his company is applying for to secure a new vessel for its expanding shipping and logistics firm, the company said on Monday.



In a disclosure to the local bourse, Chelsea Logistics and Infrastructure Holdings Corp. said the state guarantee being requested through the Philippine Guarantee Corp. (PGC) would allow the logistics company to lock up the loan from “one of the main banks in the country” with which it is about to reach its single borrower’s limit (SBL).



An SBL is a central bank macroprudential measure that orders lenders to limit credit extended to borrowers in order to avoid being overexposed on a particular debtor. SBL is meant to manage credit risks for banks associated with lending.



Chelsea issued the statement in response to a February 14 column of Victor Agustin, published in the Philippine Star, that revealed the Uy-led firm’s application for guarantees. But the company also quickly assured that the guarantee is “limited to the loan of approximately P700 million” and does not cover its entire debt pile.



Technically, a state guarantee means PGC would have to shoulder Chelsea’s loans in case of default. Under its program for large accounts, the PGC may repay up to 90% of the borrower’s loan in case of a default.



But Chelsea assured this is far from happening since it has executed a “chattel mortgage” for the vessel it is acquiring that gives lenders the right to confiscate the vessel in case of non-payment.



“Hence, there is no exposure for PGC when it extends this guarantee to the Group,” the disclosure read.

“Chelsea Group is capable of covering all its loan obligations…,” it added.

In 2018, Chelsea recorded a net loss of P622.13 million, reversing a net income of P47.35 million the prior year, financial statements showed.

The company’s total assets grew 22.3% year-on-year to P32.29 billion in 2018, but its liabilities, including loans, grew faster by 51.2% to P15.62 billion.

Consequently, its debt-to-equity ratio, a measure of a company’s capacity to service its debts, stood at 1.2 in 2018, data showed. In his column, Agustin said “Chelsea said it had committed to creditors that the ratio would be kept under 3 to 1.”

Chelsea is part of the Udenna Corp., Uy’s fast-growing holding company that since President Duterte took office has expanded to include not only oil and logistics ventures, but also telecoms and media.

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The massive growth of Uy’s business empire has fueled concerns over how he raises money to fund his acquisitions, but company officials have repeatedly assured the public that their business is strong enough to meet its financial obligations.

Udenna Corp., Uy’s fast-growing holding company, incurred interest bearing loans of P8.5 billion as of the end of 2018, higher than the P5.46 billion recorded in 2017.



READ: Udenna loans rise to P8.5 B in 2018



“The Group will make sure that the interests of its shareholders are protected. No malicious misinformation will succeed and the Chelsea Group may seek legal action against such attacks, if necessary,” Chelsea said in the disclosure.