U.S. private equity firm to buy PH shipyard in ex-U.S. Navy base for $300M

The fate of the strategically located Subic Bay shipyard has been a national security concern for defense chiefs, with fears it could be taken over by state-run firms from China.

U.S. private equity firm Cerberus will acquire for $300 million a debt-laden shipyard in the Philippines at a former U.S. Navy base close to the South China Sea, the facility’s trustee and two sources with knowledge of the deal said on Tuesday.

The fate of the strategically located Subic Bay shipyard has been a national security concern for defense chiefs, with fears it could be taken over by state-run firms from China, with which the Philippines has a long history of mistrust.

In 2019, at least eight foreign companies had expressed interest in the shipyard including two unidentified Chinese firms.

China has overlapping territorial claims in the South China Sea with several countries including the Philippines, which has repeatedly protested Chinese actions to expand its presence in the trade route that services $3 trillion of commerce each year.

The shipyard, which was run by Hanjin Philippines before it defaulted on loans worth $1.3 billion in 2019, is considered an important asset because of its shelter, depth and access to the South China Sea.

The bay northeast of the capital Manila, was home to a U.S. navy base until 1992.

Cerberus will buy the shipyard for $300 million and parts of it will be leased to locators, said Rosario Bernaldo, an administrator for the facility. Activity in the shipbuilding facility, where Hanjin employed 20,000 workers, is expected to restart this year, she added.

The Philippines Defense Secretary Delfin Lorenzana had previously advocated for the navy to take over the shipyard to save jobs and protect national security.

According to a source with knowledge of the deal who was not authorized to speak to media, the navy will lease a third of the 300-hectares (741.32 acres) facility from Cerberus for its own base.

Both Lorenzana and a spokesperson for the defence department did not immediately respond to a request for comment on the Cerberus agreement.

The parties are aiming to close the deal on April 15, another source said.

The value of the deal represents the bulk of the $412 million Hanjin owes to Philippine lenders BDO Unibank, Bank of the Philippine Islands, Rizal Commercial Banking Corp, Metropolitan Bank & Trust Co and Land Bank of the Philippines.

BPI declined to comment due to a confidentiality agreement, while the remaining creditors did not immediately respond to requests for comment. Cerberus also did not immediately respond to a request for comment.