US court allows PAL to access $505 million loan

MANILA, Philippines — Philippine Airlines Inc. (PAL)’s recovery bid further gained ground after the flag carrier secured an approval to access a $505-million debtor-in-possession (DIP) financing.

PAL received US court approval on a final basis to access a $505-million DIP financing, which the airline said is “a core feature” of its restructuring plan.

“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. We want to thank our lenders, aviation partners and other creditors for their high level of support and confidence in the future of PAL. We also appreciate the support of our valued customers as we continue to serve travelers and the Philippine economy,” PAL president and chief operating officer Gilbert Santa Maria said.

PAL’s $505-million DIP financing is composed of a $250-million first lien secured Tranche A multi-draw term loan, of which $20 million was drawn following approvals on the “first day” court hearing last Sept. 9.

It also includes second lien secured Tranche B multi-draw term loan facility of $255 million.

“With approval to fully access our DIP financing, PAL has the additional liquidity needed to meet our current and future obligations and to continue operating as usual. PAL will emerge a leaner and more competitive airline thanks to our hardworking employees, the resolute commitment of our majority shareholder and the strong support from our stakeholders and creditors,” PAL chief financial officer Nilo Thaddeus Rodriguez said.

“We’re grateful that the court saw fit to approve our motions, and we’re told it was a most efficient Chapter 11 hearing for a case of this complexity,” Rodriguez said.

On top of the DIP financing, the US bankruptcy court also granted other approvals on a final basis for PAL’s motions for customer programs, critical and foreign vendors, employee compensation and authorization to implement the airline’s restructuring support agreements with stakeholders.

PAL said these approvals would enable the airline to emerge as a stronger and better-capitalized airline.

“PAL will continue to operate flights in the normal course of business in accordance with safety regulations, and the Company expects to continue to meet all its current financial obligations throughout the Chapter 11 process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors,” the company said.

PAL last Sept. 3 filed for a pre-arranged restructuring under the US Chapter 11 process in the Southern District of New York in hopes of emerging with fresh capital and lower debt.

Aside from the $505 million in long-term equity and debt financing from its majority shareholder, PAL’s restructuring plan also includes $150 million of additional debt financing from new investors.

The airline has also filed a petition before a Pasay City court for the principal purpose of ensuring that the local courts will recognize formally the Chapter 11 process and the corresponding decisions the New York court may grant or award.