No slowdown in Udenna’s buying spree

Dennis Uy’s Udenna Corp., which has been on an acquisition binge in the past two years, won’t be slowing down despite its high debt level, with officials saying the company is strong enough to meet its financial obligations.

Udenna vice president for finance Ignacia Braga said the company’s borrowings show there is nothing anomalous about the growth of Uy’s empire as he brushed aside critics’ concerns.

“Before, they were asking us how we were able to buy (companies). This is our answer -- we borrowed,” Braga said.

She said the company would continue to borrow to fund future acquisitions and the capital expenditure requirements of the different companies under Udenna.

Braga assured the public that the company’s financial model, which is debt and leveraged buyout, was sustainable.

A leveraged buyout is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. Under this transaction, the assets of the company being acquired are often used as collateral for the loans.

“We are expecting that the entity we are investing in would generate the proceeds. This means that the project would generate the revenue to pay off these loans,” Braga said.

The different business units under Udenna borrow independently of each other and of the holding company itself. It is independent of each other. It is not Udenna that is borrowing,” she added.

Braga said Udenna’s financial model is also acceptable to lenders.

“Most banks want to lend on operating money because the revenue flow is clear,” she said.

Moving forward, she said Udenna’s buying binge isn’t over as the company gets offers every month from businessmen selling their businesses to Uy.

“Dennis is always on the top of mind of investors. We don’t shy away from opportunities,” she said.

However, she said that any new acquisition would be related or would have synergy with existing businesses.

Udenna is Uy’s holding company for his various businesses.

It has interest-bearing loans of P85.8 billion as of the end of 2017, up 200 percent year on year.

‘Borrowings helped finance the P50 billion deal involving a 177-hectare property in the Clark Freeport Zone.

Udenna subsidiary Clark Global Gateway Corp. (CGCC) entered into a loan agreement with BDO, Philippine National Bank and Bank of China to fund the acquisition.

But Udenna breached its debt coverage ratio for this particularl loan, according to a report by Punongbayan & Aurallo Grant Thornton.

UDEVCO or Udenna Development Corp. is the real estate and property development arm of Udenna.

As of the end-2017, Udenna had investments in around 55 companies from less than half in 2015.

These companies are in a wide array of industries — infrastructure, shipping, construction, trading, waterworks, maritime, logistics, gaming and hotels.

Udenna’s net income grew more than five times to P4.3 billion in 2017 from P780 million in 2016.