Mactan-Cebu Airport operator, lenders execute deal on debt easing, rebalancing

GMR-Megawide Cebu Airports Corp. (GMCAC), the operator of Mactan-Cebu International Airport (MCIA), said Friday it executed with its creditors an agreement for the rebalancing of its debt servicing commitments and relaxation of debt covenants.

In a disclosure to the Philippine Stock Exchange, GMCAC parent firm Megawide Construction Corp. said the agreement is associated with the end-2020 outstanding loan of P23.9 billion for project financing contracted to develop, operate, and maintain the MCIA.

GMCAC is a consortium between Megawide and India’s GMR Group formed to manage and develop MCIA for the next 25 years.

GMCAC’s 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 travel."

Likewise, principal payments will be postponed to 2027 to 2029 period, based on the renewed Omnibus Loan and Security Agreement (OLSA), when the travel industry is expected to have fully recovered from the adverse effects of COVID-19 pandemic.

“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 Megawide chairman and CEO Edgar Saavedra.

As the pandemic wreaked havoc on the travel industry, Megawide said GMCAC formally solicited 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 Bayanihan law.

The lenders unanimously approved the request on June 11, 2020, it added.

With travel continuing to be restricted, Megawide said GMCAC requested for a further extension of settlement to September 2020, which GMCAC 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 sent notifications to its lenders to defer 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.

“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.—AOL, GMA News