Pasay court recognizes PAL Chapter 11 filing

MANILA, Philippines — A Pasay City court has granted the petition of Philippine Airlines Inc. (PAL) seeking recognition of the company’s Chapter 11 process in the US.

Last month, PAL filed before a Pasay City court a petition for recognition of the foreign proceeding under the Financial Rehabilitation Act, with the purpose of ensuring that the local courts will formally recognize the Chapter 11 process and the corresponding decisions the New York court may grant or award.

“After a judicious examination and evaluation of the evidence adduced, this court finds the petition adequately meets all the procedural and substantial requirements for recognition of the Chapter 11 proceeding and no ground exists to refuse recognition,” the court ruling said.

PAL on Sept. 3 voluntarily filed for a pre-arranged restructuring under the US Chapter 11 process in the Southern District of New York.

The restructuring plan includes infusion of $505 million in long-term equity and debt financing from PAL’s majority shareholder, alongside $150 million of additional debt financing from new investors.

Lucio Tan’s Buona Sorte Holdings Inc. (BSHI) will extend a $250 million loan to PAL on top of the $275 million in fresh capital it is injecting into the flag carrier’s parent firm PAL Holdings Inc.

PAL Holdings said BSHI, a privately owned company of Tan, will extend a five-year term loan to PAL in the amount of $250 million.

The amount will complete the $505 million working capital requirement of the flag carrier under its proposed plan of reorganization in its Chapter 11 filing.

PAL Holdings will also be increasing its authorized capital stock to P30 billion from P13.5 billion, to be supported by a private placement of BSHI worth $255 million, or about P12.75 billion.

The fresh capital to be received from BSHI will be downstreamed by PAL Holdings to its subsidiary PAL.

The 10.2 billion new shares to be received by BSHI from PAL Holdings will be issued at a subscription price of P1.25 per share.

Upon issuance of new shares, BSHI is expected to own 46.77 percent of the resulting outstanding capital stock of PAL Holdings.

Post capital hike, BSHI, together with Cosmic Holdings Corp. and Trustmark Holdings Corp. which collectively comprise the Lucio Tan Group, will own 89.45 percent of PAL Holdings.

The increase in PAL Holdings’ authorized capital will be presented for approval at the company’s annual stockholders’ meeting on Nov. 25.

PAL Holdings’ cash infusion as well as the loans of other unsecured creditors will be used to support PAL’s application for capital increase via debt-to-equity, which is targeted to be filed in the latter part of the year.

The Lucio Tan Group is committed to support PAL’s overall plan to position itself for the post-pandemic environment.

“We wish to underscore that the proposed transaction is part of the overall plan of PAL to position itself for the post-pandemic environment which upon completion, is expected to enhance the shareholder value of PAL, and by extension, that of the issuer, thereby ultimately redounding to the benefit of all shareholders of issuer, including minority and independent shareholders,” PAL Holdings said.