Agreement with banks frees up P3.6B in cash for GMCAC from 2021 to 2023

Megawide Cebu Airports Corp. (GMCAC), airport subsidiary of Megawide Construction Corp. and its lenders have executed an agreement for the rebalancing of its debt servicing commitments and relaxation of debt covenants, which are associated with the end-2020 outstanding P23.9 billion project financing contracted to develop, operate, and maintain the multi-awarded Mactan-Cebu International Airport.

The lenders are composed of the country’s largest banks, namely BDO Unibank Inc., Philippine National Bank, Bank of the Philippine Islands, Development Bank of the Philippines, Land Bank of the Philippines, and Metropolitan Bank and Trust Company, as well as the Asian Development Bank. BDO Capital also acted as the financial advisor to the transaction.

Based on the final terms of agreement executed by both parties, the exercise will temporarily free up approximately P3.6 billion in cash from 2021 to 2023 and reinforce GMCAC’s financial position, which can be utilized to support operations while the ongoing pandemic limits air travels.

Principal payments will be postponed to 2027 to 2029, based on the renewed Omnibus Loan and Security Agreement, when the travel industry is expected to have fully recuperated from the ill effects of Covid-19.

“The agreement is a strong sign of support and confidence in Megawide’s airport business model. The more relaxed debt servicing schedule will provide our airport operations a clearer runway to full recovery once the situation normalizes,” said Megawide chairman and chief executive officer Edgar Saavedra, in a disclosure to the Philippine Stock Exchange Friday, May 7, 2021.

Grace period

As the pandemic wreaked havoc on the travel industry, GMCAC formally solicited a 30-day grace period for its six-month debt servicing from Dec. 15, 2019 falling due on June 15, 2020, as provided under the “Bayanihan Act.”The lenders unanimously approved the request on June 11, 2020.

With travel continuing to be restricted, GMCAC requested a further extension of settlement to September 2020, which GMCAC duly paid on Sept. 15, 2020, including additional interest on the principal and interest accruing from June 15 to Sept. 15, 2020.

On Dec. 11, 2020, GMCAC sent notifications to its lenders to defer its principal and interest payments falling due on Dec. 15, 2020 to Feb. 15, 2021 as the pandemic intensified. On Dec. 15, 2020, GMCAC received a reply from the lenders unanimously approving the request. /