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HomeAviationLucio Tan’s firm sinks $505M in PAL’s reorganization

Lucio Tan’s firm sinks $505M in PAL’s reorganization

  • Lucio Tan, Sr.’s Buona Sorte Holdings, Inc. will infuse a total of US$505 million into Philippine Airlines to support the airline’s reorganization plan
  • Of the total, $255 million (P12.750 billion) will be paid to PAL parent firm PAL Holdings, Inc., which will downstream the funds to the flag carrier
  • Another $250 million will be loaned by BSHI to PAL

Lucio Tan, Sr.’s Buona Sorte Holdings, Inc. (BSHI) will infuse a total of US$505 million as working capital into Philippine Airlines (PAL) to support its reorganization plan.

Of the total, $255 million (P12.750 billion) will be paid to PAL parent firm PAL Holdings, Inc. (PHI), which will downstream the funds to the flag carrier, while the $250 million will be loaned by BSHI to PAL.

In a regulatory disclosure, PHI said the P12.750 billion will be the full and final payment for BSHI’s subscription to 10.200 billion common shares to be issued in support of PHI’s application for increase in capital.

The PHI Board last September 27 approved to amend the company’s seventh article of incorporation to increase the company’s authorized capital stock from P13.5 billion to P30 billion to accommodate the fresh infusion from BSHI.

Upon issuance of new shares, BSHI is expected to own 46.77% of the resulting outstanding capital stock of PHI. Post-capital hike, BSHI, together with Cosmic Holdings Corp. and Trustmark Holdings Corp., which collectively comprise the Lucio Tan Group, will own 89.45% of PHI.

PHI’s increase in authorized capital stock will be presented for the approval of shareholders on November 25, 2021 while the capital infusion is subject to approval of the Securities and Exchange Commission. PHI expects to receive the P12.75 billion in cash from BSHI before the end of 2021.

The fresh capital will then be downstreamed by PHI to Philippine Airlines, Inc. (PAI), which operates as PAL.

In addition, BSHI will extend a five-year term loan of $250 million to PAI, thereby completing the $505-million working capital requirement of the airline for its court-supervised reorganization.

PAL on September 3 voluntarily filed for bankruptcy with the United States Bankruptcy Court in New York to implement a restructuring plan that will help it navigate and survive the COVID-19 crisis.

READ: PAL files for bankruptcy in US

On September 9, Judge Shelley Chapman of the US Bankruptcy Court in New York approved all “First Day” motions on an interim or final basis for PAL’s voluntary restructuring under the Chapter 11 process.

The approval includes authorizing PAL to access the first US$20 million of its debtor-in-possession (DIP) financing totaling $505 million.

On October 1, the US court approved on a final basis PAL’s access to its DIP totaling $505 million.

READ: PAL gets US court’s nod to access $505M financing

BSHI is a privately owned company within the Lucio Tan Group’s network of corporate entities for its airline business.

“With the catastrophic impact of the COVID-19 pandemic to the global airline industry, the Lucio Tan Group, through BSHI, set about to provide the much needed capital to support PAI’s plan of reorganization,” PHI said in its disclosure.

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