Philippine Airlines, Inc. (PAL) announced on Friday that it won the approval of a United States bankruptcy judge to access the first $20 million of its debtor-in-possession financing totaling $505 million, describing the development as an “initial milestone” in its recovery journey.
PAL, which is majority owned by billionaire Lucio C. Tan, issued the statement after Shelley C. Chapman, US bankruptcy judge for the Southern District of New York, approved “all” its “First Day” motions on Sept. 9.
“These approvals mark an important step forward in PAL’s recovery plan, which will reduce the company’s debt by $2 billion and help [it] recover from the impact of the global pandemic,” the airline said.
Aside from allowing PAL to draw $20 million from its $505-million debtor-in-possession financing, the bankruptcy judge also authorized the airline to “[p]ay ongoing suppliers and trade creditors in the ordinary course for goods and services delivered throughout the Chapter 11 process,” the company said.
It also received authorization to “[c]ontinue to pay all employee wages, compensation and benefit obligations, subject to the continuation of any temporary work arrangements as necessary and maintain employee benefit programs in the ordinary course of business throughout the Chapter 11 process.”
The orders granted also covered the authorization to “[h]onor and maintain all customer programs, including valid tickets and travel vouchers, Mabuhay Miles and benefits, and refund obligations, subject to PAL’s usual terms and conditions of use.”
PAL said it expect to continue to meet all its current financial obligations throughout the Chapter 11 process.
Under its restructuring plan, PAL also aims to secure $150 million in debt financing from new investors.
The airline is hoping to exit the Chapter 11 process before the end of the year.
PAL Holdings, Inc., the listed holding company of PAL, and Air Philippines Corp., or PAL Express, are not included in the Chapter 11 filing.
Its top five creditors with the largest “secured claims” (excluding claims of insiders) totaling to $866.09 million are Philippine National Bank ($156.51 million), Banco De Oro Unibank, Inc. ($80.42 million), China Banking Corp. ($54.83 million), EXIM Guaranteed Loans ($240.1 million), and PK Airfinance S.A.R.L. ($334.23 million).
The company’s 40 largest creditors with “unsecured claims” (and which are not insiders) totaling to more than $1.4 billion include Philippine National Bank ($115.92 million), China Banking Corp. ($65.27 million), and Asia United Bank ($75.30 million).
PAL Holdings had been incurring losses even before the pandemic crisis. Its attributable net loss widened to P71.91 billion in 2020 from P10.31 billion in 2019. — Arjay L. Balinbin