US court approves Lucio Tan’s US $ 505 million capital injection into PAL
A US bankruptcy court has approved several restructuring support deals that Philippine Airlines (PAL) has entered into with stakeholders and it has allowed Lucio Tan companies to recapitalize the airline to the tune of $ 505 million.
PAL said in a statement that the court’s approval of the agreements and the US $ 505 million financing “is the critical first step towards confirming the consensus Chapter 11 restructuring plan which has almost all support. PAL’s major aircraft lessors and lenders, original equipment manufacturers and providers of maintenance, repair and overhaul services, and certain debt-financed lenders. ”
“This milestone confirms that our takeover process is on track as we continue to work hard to achieve a fully consensus-based reorganization plan in an effective manner,” said Gilbert Santa Maria, President and COO of PAL .
The press release indicates that the $ 505 million capital injection consists of a US $ 250 million senior secured multiple draw term loan and a Tranche B secured second tier multi-draw term loan facility. $ 255 million.
The US $ 505 million is provided by PAL’s majority owner, Filipino billionaire Lucio Tan, who also owns tobacco, liquor and other businesses in the Philippines. It has been widely reported over the years that Tan would normally have given up his stake in loss-making company PAL, but kept it, as he has a strong emotional attachment to the airline which is the national airline of the Philippines.
The funding could be converted, at PAL’s discretion, into long-term unsecured debt and equity, rather than repaying in cash, upon release of Chapter 11, according to the airline.
Nilo Thaddeus Rodriguez, Chief Financial Officer of PAL, said: “Additional liquidity is needed to meet our current and future obligations and continue to operate as usual. “
“PAL will become a lighter and more competitive airline thanks to our hardworking employees and the strong commitment of our majority shareholder [Lucio Tan companies] and the strong support of our stakeholders and creditors, ”he adds.
PAL says it will continue to operate flights and expects to continue to meet all of its current financial obligations throughout the Chapter 11 process to employees, customers, government and its donors, lenders, suppliers. and other creditors.
The airline filed for Chapter 11 bankruptcy in the United States on September 3 after reaching agreements with numerous lessors and creditors over a corporate restructuring that includes a substantial reduction in the fleet.
The aim is to reduce its fleet of 90 aircraft by 25%. The planes to depart would include: four of its six Airbus A350s, four of its 10 Boeing 777s, seven of its 15 Airbus A330s as well as four Airbus A320s and two De Havilland Aircraft of Canada Dash 8-400s.
PAL has also delayed the delivery of 13 Airbus A320neo on order after 2025.
It positions itself as a full-service premium carrier and remains the Philippines’ number one international airline, but in the domestic air transport market, it lags far behind low-cost carrier Cebu Pacific Air in terms of market share.
It attempted to compete nationally by transforming its subsidiary Air Philippines, which operates at PAL Express, into a lower cost operator with its fleet of Airbus A320 and Dash 8 family aircraft.
PAL is still the most powerful carrier internationally as it has valuable airport slots at Manila Airport and overseas destinations popular with Filipinos like Los Angeles.