MANILA, Philippines – A US court allowed beleaguered national carrier Philippine Airlines to access a loan facility that would maintain its operations and finance its recovery plan.
In a statement, PAL reported that the U.S. bankruptcy court granted the flag carrier access and use of its debtor-in-possession financing totaling $505 million, which in this case include long-term equity and debt financing.
Billionaire Lucio Tan owns a majority of shares in the cash-strapped airline.
“This important step confirms that our recovery process is on track as we continue to work hard on securing a fully consensual reorganization plan in an efficient manner,” said Gilbert F. Santa Maria, PAL president and chief operating officer.
The DIP financing is a ‘core feature’ of PAL’s restructuring plan, which consists of a multi-term draw loan facility. That said, PAL’s bankruptcy filing in the US court gave it was meant to give the airline wiggle room to renegotiate debt, lease, and maintenance agreements. The Chapter 11 filing would shave the loss-making airline’s debts by over $2 billion and reduce its aircraft fleet by 25%.
The US bankruptcy court’s approval granted PAL’s authorization to implement its restructuring support agreements with stakeholders. Likewise, the court gave the nod for the cash-strapped airline’s motions for customer programs, critical and foreign vendors, and employee compensation.
Trading of PAL’s stock in the Philippine Stock Exchange, under its parent company PAL Holdings Inc., was halted on June 18. So far, the stock remains suspended.
A disclosure in the PSE days ago reported that PAL Holdings granted the increase of its authorized capital from P13.5 billion to P30 billion, meant to make space for a fresh infusion of funding from the Lucio Tan Group of Companies.
“The new capital will in turn be invested into issuer's subsidiary, Philippine Airlines, pursuant to the court-supervised reorganization of PAL,” the disclosure said.