Megawide unit gets relief from creditors
The airport infrastructure arm of Megawide Construction Corp. has struck a deal with banks to restructure about P23.9 billion worth of debt, freeing up about P3.6 billion in cash to boost the operations of Mactan-Cebu International Airport (MCIA) in the next three years amid a prolonged coronavirus pandemic.
According to a disclosure to the Philippine Stock Exchange on Friday, GMR Megawide Cebu Airports Corp. (GMCAC) and its lenders executed an agreement for the “rebalancing” of its debt servicing commitments and relaxation of debt covenants associated with the end-2020 outstanding project financing that was contracted to develop, operate and maintain MCIA.
The lenders are BDO Unibank Inc., Philippine National Bank, Bank of the Philippine Islands, Development Bank of the Philippines, Land Bank of the Philippines, Metropolitan Bank and Trust Co. and the Asian Development Bank. BDO Capital acted as the financial adviser to the transaction.
Based on the renewed Omnibus Loan and Security Agreement (OLSA), repayment of GMCAC principal debt was suspended and rescheduled to 2027-2029, when the travel industry is expected to have fully recuperated from the ill effects of COVID-19.
The exercise is thus seen to temporarily free up cash for 2021 to 2023, thereby supporting the operations of MCIA while the ongoing pandemic limits air travels.
Cash preservation
The disclosure noted that GMCAC and the lenders had held a lengthy discussions focused on formulating a “rational, comprehensive, and longer-term” program that would address the cash flow challenges of the airport business during the pandemic, while offering definite, acceptable, and equitable terms to the lenders once normalcy returns.
“We are glad that the negotiations with our lenders were finalized and we express our sincerest gratitude to our financial partners, who from the very start of this pandemic have been very supportive. 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 Edgar Saavedra, chair and CEO of Megawide.
Last year, GMCAC had availed itself of a 30-day grace period for its six-month debt servicing obligation for the period Dec. 15, 2019 to June 15, 2020, as provided under the “Bayanihan Act.” The lenders unanimously approved the request on June 11, 2020.
With travel still restricted, GMCAC requested further extension of settlement to September 2020. GMCAC made the payment 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, the request was unanimously approved by the lenders.
“From the very start, our lenders were very accommodating and have been observing the true spirit of Bayanihan. They have genuinely exercised their sworn mandate to act as intermediaries between sources and users of capital, as they have collectively consented to our requests on all occasions. We are very grateful that our lenders actually initiated further discussions to resolve all the issues and settle for a more extensive and mutually-beneficial scheme for all parties,” said Ramon Diaz, Megawide’s group chief financial officer.
For its part, GMCAC prioritized cost rationalization and cash preservation as banks took on a more conservative stance.
Megawide sees the successful completion of the negotiations as a strong sign of endorsement and confidence in GMCAC’s airport’s business model and Megawide’s long-term value creation initiatives.
