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Business

What’s the next chapter for PAL?

EYES WIDE OPEN - Iris Gonzales - The Philippine Star

The clock is ticking for Lucio Tan-owned flag carrier Philippine Airlines Inc., and stakeholders are waiting with bated breath.

The question on everyone’s mind is if the planned Chapter 11 filing in the US – a bold move meant to help PAL survive the headwinds it is facing – will still happen.

PAL insiders said this is still the goal.

“The direction has not changed. The filing of Chapter 11 is still the goal,” one company source said.

Last week, I wrote about the resignation of esteemed PAL board director Gregorio Yu who threw in the towel supposedly over winks encountered in PAL’s survival game plan, anchored on the Chapter 11 filing, of course.

The following day, PAL confirmed Yu’s resignation, simply citing “personal reasons” for his departure.

Yu, as an old guard in the board, is a big loss to PAL, adding to the roster of directors who resigned in recent years, including the multi-awarded ex-BSP Governor Amando Tetangco Jr. and former Solicitor General, the legal luminary Estelito Mendoza.

But Yu’s resignation has not changed PAL’s goal, insiders said.

The process is simply taking time because the board and shareholders are doing some “revalida” or a final examination of everything needed for the filing and after.

I’m sure it has to do with so much more than documentary requirements. The bottomline perhaps is really all about the bottomline – whether it’s that of the airline or that of El Kapitan.

But I’m told that PAL’s board is aiming to finalize everything, possibly this week.

If, however, this continues to drag on, PAL’s window of survival diminishes. Of course there are many other options, from the best to the worst case scenario.

I don’t know enough to make a fearless forecast, but I’m sure that in this brutally uncertain time, anything can happen to PAL and all its stakeholders.

Indeed, PAL’s goal or fate may change in the wink of an eye.

‘Do not try this at home’

A Chapter 11 filing is neither a liquidation nor a bankruptcy. It’s a court proceeding filed in the US that allows a company protection from creditors and time to get back on its feet.

Seabury Capital, the company helping PAL for its Chapter 11 journey, said that while this route is not an easy path, it is a “well-worn path forward.”

“While no two restructurings are perfectly alike, our experience has taught us that there is a well-worn path forward. We lived that path, being at the forefront of our own turbulent restructuring turned Chapter 11 that spanned more than 35 countries, 165 assets, 120 debtor entities (and equal number of boards of directors) and more than 25 major creditors,” according to an article by Oliver Althoff, managing director at Seabury Securities LLC and Todd Wolynski, partner at White & Case LLP.

“A Chapter 11 filing may be preferable for your restructuring to a traditional liquidation, scheme of arrangement or examinership process as are found in many European countries. The US bankruptcy system has a robust history with processes and procedures that seeks to maximize value for all creditors,” the article also said.

It will also allow the existing management team to continue to operate the business, ensuring continuity of service to clients and value preservation.

Furthermore, the article said that boards can take comfort that, subject to their creditor mix, it is unlikely that their largest creditors will violate the global reach of a US bankruptcy court’s worldwide automatic stay and will instead respect an approved Chapter 11 plan.

As a final note, authors said it’s important for a company to know everything about some of these “highly technical, often esoteric processes” to achieve a productive end result.

Perhaps, this is what PAL’s “revalida” is about.

“Your actions will affect whether your business preserves or loses value… As they say on TV, ‘Do not try this at home; these are trained professionals’,” the authors said.

Troubled

All airlines across the globe are in trouble, especially in this time of COVID-19 and not all of them will survive.

In the Philippines, airlines are private companies, but imbued with public interest. I do hope our local airlines make it through the turbulence. I don’t want to wake up in a post-pandemic era with just a single carrier available or no airline operating in the country anymore.

While our very own carriers sometimes make us seethe with frustration over their occasionally shabby services, I’d take them any day over other alternatives — dangerous, cramped ferry rides at sea, sometimes in the dead of night.

I experienced this a few years ago, when I needed to go to Marinduque and the only available ride to the far-flung province then was a ferry ride from a port in Lucena, Quezon. To get to the port, I had to take a four hour arduous bus ride from a station in Quezon City.

It was a standing-room-only boat ride and we were like refugees lost at sea.

But this isn’t about me and my traumatic ferry rides.

This is really about the movement of goods and services and people for business, leisure and emergencies — vaccines, for instance — at a faster pace, in sync with our constantly moving and turning world.

 

 

Iris Gonzales’ email address is eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com

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