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GMR Megawide Cebu Airports Corp., which operates Mactan-Cebu International Airport, executed an agreement with its lenders that will temporarily free up about P3.6 billion in cash from 2021 to 2023
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The freed-up cash can be utilized to support operations while the pandemic limits air travels
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Under the agreement, principal payments will be postponed to 2027-2029 when the travel industry is expected to have fully recuperated from the ill effects of COVID-19 pandemic
GMR Megawide Cebu Airports Corp. (GMCAC) and its lenders have executed an agreement easing the Mactan-Cebu International Airport (MCIA) operator’s debt payment obligations, a move that will temporarily free up about P3.6 billion in cash that GMCAC can utilize to support operations while the ongoing pandemic limits air travels.
The agreement signed on May 6 rebalances GMCAC’s debt servicing commitments and relaxes debt covenants, which are associated with the end-2020 outstanding P23.9-billion project financing contracted to develop, operate, and maintain the MCIA.
Based on the final terms of agreement, the exercise will temporarily free up some P3.6 billion in cash from 2021 up to 2023 to reinforce GMCAC’s financial position, the airport operator’s parent firm, Megawide Construction Corp., said in a statement.
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 Co., as well as the Asian Development Bank. BDO Capital acted as the financial advisor in the transaction.
Based on the renewed Omnibus Loan and Security Agreement, principal payments will be postponed to 2027-2029, when the travel industry is expected to have fully recuperated from the ill effects of the COVID-19 pandemic.
“The more relaxed debt servicing schedule will provide our airport operations a clearer runway to full recovery once the situation normalizes,” Megawide chairman and chief executive officer Edgar Saavedra said.
As the pandemic wreaked havoc on the travel industry, GMCAC formally solicited for a 30-day grace period for its six-month debt servicing from December 15, 2019 falling due on June 15, 2020, as provided under the government’s Bayanihan Act.
The lenders unanimously approved the request on June 11, 2020, Megawide noted.
With travel continuing to be restricted, GMCAC requested for a further extension of settlement to September 2020, which it duly paid on September 15, 2020, including additional interest on the principal and interest accruing from June 15 to September 15, 2020.
On December 11, 2020, GMCAC requested the deferment of its principal and interest payments falling due on December 15, 2020 to February 15, 2021 as the pandemic intensified.
On December 15, 2020, GMCAC received a reply from the lenders unanimously approving the request.
While the Philippines initially expected a short-lived impact of the virus, Megawide said GMCAC prioritized cost rationalization and cash preservation as banks took on a more conservative stance. Both GMCAC and its lenders embarked on a lengthy discussion on formulating a rational, comprehensive, and longer-term program that addresses the cash flow challenges of the airport business during the pandemic, while offering definite, acceptable, and equitable terms to the lenders once normalcy returns.
