BDO Unibank, Inc.'s issuance of Standby Letters of Credit in support of First Gen Corporation’s acquisition of a 33% stake in Prime Hydropower Energy, Inc.

BDO Unibank, Inc. has issued standby letters of credit (SBLCs) in the amount of P9.9 billion and P14.85 billion in support of First Gen Corporation’s (First Gen) acquisition of a 33% stake in Prime Hydropower Energy, Inc. (PHEI), a member of the Razon group of companies. First Gen’s wholly-owned subsidiary FGEN Aqua Power Holdings, Inc. now owns 33% of PHEI, which is currently constructing the 600MW Wawa and 1,400MW Pakil Pumped Storage Hydro Projects.

The issuance of the SBLCs was made conditional on covenants required by BDO to ensure leadership continuity across operating segments and subsidiaries of the First Philippine Holdings Corporation (FPH) group of companies. The leadership continuity covenants provide, among others, that the occurrence of a Change of Management Control is an Event of Default in outstanding loans of the FPH group. A Change of Management Control arises upon the occurrence of any of the following events: Federico R. Lopez (FRL) or his Designee ceases to be Chief Executive Officer of First Gen; members of the executive committee of First Gen cease to be designees of FRL; FRL or his Designee ceases to be the proxy of First Gen entitled to vote all of First Gen’s shares in PHEI; FRL ceases to be a director of FPH; Designees of FRL cease to comprise at least a majority of the members of the board of directors of First Gen; the directors nominated by First Gen in PHEI cease to comprise FRL or his Designees; or FRL and his family will cease to own directly or indirectly at least 29.17% of Lopez Inc. A “Designee” refers to a person whom FRL confirms in writing to be acceptable to him to occupy the relevant positions described above. 

BDO’s issuance of the SBLCs in support of First Gen’s acquisition of a 33% stake in the pumped storage hydro projects, coupled with contractual arrangements on the Change in Management Control, demonstrates the bank’s recognition that the continued active involvement of FRL in the FPH group is necessary, vital, and indispensable. BDO’s commitment terms are clear that maintaining the role of FRL in the FPH group is critical, such that replacing FRL will trigger defaults in the loan agreements of the FPH group. Such a structure not only ensures that the FPH group maintains a unified strategic direction under FRL, but underscores the link between the FPH group’s financial footing and its leadership under FRL.