Davao-based businessman Dennis Uy’s Phoenix Petroleum Philippines Inc. had agreed to a P9-billion sale-leaseback agreement with Sy-led BDO Unibank Inc. to cut losses and regain its prepandemic financial strength.
Phoenix chief financial officer Ignacia Braga last week said the agreement was part of the oil company’s liability management exercise to raise capital for operations and reduce debt.
In a sale-leaseback agreement, the seller of an asset, in this case Phoenix, becomes the lessee, while the purchaser becomes the lessor. This way, capital is freed up and a business owner like Phoenix is allowed to pay down its debt and improve its financial position.
Inquirer tried to contact both Phoenix and BDO for further details about the deal, but officials have yet to respond.
Braga said the deal with BDO involved the sale of terminals, depots and retail stations, which it could repurchase within a three- to five-year period.
“The corporation is currently in the process of streamlining its operations, restructuring its debt and identifying potential sources of liquidity in order to generate cash flow to settle its obligations or generate some liquidity for working capital,” Braga noted during Phoenix’s annual stockholders’ meeting last Oct. 26.
In the same meeting, Phoenix president Henry Albert Fadullon clarified that there would be “no effect on the company’s operations and its ability to capture value from its business.”
Phoenix has been significantly bleeding since the COVID-19 pandemic hit the country. In the first semester of 2023, net loss swelled by more than 3,200 percent to P2.066 billion from P62.11 million in the same period last year.
Assets to be monetized
Phoenix sold only 756 million liters of fuel during the period, lower than the 1.69 billion liters recorded in 2022, as the average price of Dubai crude, the benchmark of Asian refineries, dropped by 24 percent to $77.37 per barrel.
Fadullon said they were “actively on the lookout” for assets that could be monetized to generate additional resources to fuel the company’s operations.
“To regain stronger footing, we recognize the importance of managing our accountabilities while maintaining optimum levels of operations … The liability management exercise [is] our way of addressing our obligations with our creditors and subsequently accessing more liquidity,” he said.
Last year, Phoenix was also under pressure to settle its multimillion-dollar debts to bioethanol suppliers after it was hit with allegations of failing to pay on time.
The company had cited the “extreme volatility” in global crude oil prices, due to the Russia-Ukraine conflict, among its pandemic challenges.
Phoenix had also denied allegations of employee retrenchments to cut losses.
Last Monday, Phoenix announced it was divesting its shares in Singapore-based subsidiary PNX Petroleum Singapore Pte. Ltd. via share buyback to generate additional funds and sustain operations. INQ