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P21.4B long term loans: Tan Caktiong flirts with possible default if creditors didn’t relax, waive Jollibee’s debt covenants

Jollibee Foods Corp. of bilyonaryo Tony Tan Caktiong was at risk of a possibly running afoul of its long-term loan commitments if its creditors did not give the struggling fastfood giant some breathing space in the first half of 2020.

In its report to regulators, Jollibee revealed that its creditors were generous enough to relax or waive some of the restrictions in their loan agreements in the first half of 2020 where it coughed out an average of P2 billion in losses per month.

“As at June 30, 2020, the Debt-to-EBITDA (earnings before interest, taxes, depreciation), and amortization ratio was amended temporarily from 3.0-4.0 or below to 5.0 or below and Debt-to-Service Coverage Ratio (DSCR) was waived. The Parent Company is in compliance with these debt covenants as at June 30, 2020 and December 31, 2019,” said Jollibee.

Banks normally use debt-to-EBITDA to assess a company’s probability of defaulting on issued debt. DSCR indicates whether a company has enough income to pay its debts.

Jollibee has 19 long-term loans worth a total of P21.394 billion and payable from 2020 to 2026:

* 8 loans worth P13.016 by the parent company

*Three loans worth a total of P5.185 billion for US subsidiaries

*Three loans worth P2.1 billion for local subsidiaries

*5 loans worth P1.05 billion for its Vietnam operations

“The loans are guaranteed by the Parent Company. Consequently, the Parent Company is subject to certain debt covenants which include, among others, maintaining a Debt-to-Equity ratio, Debt-to-EBITDA ratio and Debt-to-Service Coverage Ratio,” said Jollibee.

Jollibee paid P409.4 million interest expense for its long term loans in the first half of 2020, down by 37 percent from P647.1 million during the same period last year.

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