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Philippines Tycoon, Duterte’s Ally’s Stocks Tumble on Default Notice From Banks

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(Bloomberg) -- Stock shares controlled by Philippine businessman Dennis Uy slumped after one of his company’s units received a default notice from a consortium of banks, threatening further losses to an already struggling market.

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Prices for oil firm Phoenix Petroleum Philippines Inc. slid 11% Monday, and shipping company Chelsea Logistics & Infrastructure Holdings Corp. plunged as much as 16% before closing 12% lower. A gauge of financial stocks dropped 2.8%, the steepest loss in a month.

Uy’s Udenna Corp. received a default notice on July 22 against its affiliate, Clark Global City Corp. Banks led by BDO Unibank Inc., the Philippines’ biggest lender, said Udenna had failed to pay $4 million in debt related to an airport lease agreement.

In a statement on Monday, Udenna said the company had settled the debt issue “to the satisfaction of the majority lender.” BDO Unibank said Uy’s obligations were secured and that a potential default wouldn’t have a material adverse effect on the bank.

Still, that did little to ease market jitters on Monday. Shares of BDO sank 4.6%, outpacing losses among Philippine lenders. The Philippines’ benchmark stock index, Asia’s second-worst performer this year, dropped 0.9% at the close, improving on an earlier loss of as much as 1.6%.

Other Udenna units that struggled included Dito CME Holdings Corp., a telecommunications company, which plunged as much as 9.1%. PH Resorts Group Holdings Inc., Udenna’s casino venture, slumped 7.5% before paring losses to 2.5%.

“Investors are seeing a lower value for the stocks because of the risk this could spread to other companies within the group and affect its ability to raise financing,” said Astro del Castillo, managing director at First Grade Finance Inc. He added that Uy-linked stocks will be considered “high risk” until the issue is revolved.

Udenna, a conglomerate with investments in everything from oil to casinos, has seen its debt grow following a series of deals made during former President Rodrigo Duterte’s six-year term.

Following volatility in global markets and project delays, the firm said in May that it was exploring asset sales and alliances for some of its businesses. Amid a government probe, Uy also put on hold a project to develop the nation’s only operating gas field.

Udenna had total liabilities of 254.5 billion pesos ($4.5 billion) by the end of 2020, according to its annual report filed with the Securities and Exchange Commission.

(Updates share prices and company details)

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