• Philippine Airlines received approval from a US bankruptcy judge to access financing for its Chapter 11 proceedings, allowing the flag carrier to continue operations
• Judge Shelley Chapman of the US Bankruptcy Court in New York on September 9 authorized PAL to access the first US$20 million of its debtor-in-possession financing totaling $550 million
• PAL president and chief operating officer Gilbert Santa Maria called the approval “a significant step in our recovery plan and supports our ongoing operations”
• PAL was also authorized to pay suppliers and trade creditors, honor and maintain all customer programs, and pay all employee wages, compensation and benefit obligations
Philippine Airlines (PAL) received approval from a US bankruptcy judge to access financing for its Chapter 11 proceedings, allowing the flag carrier to continue operations.
Judge Shelley Chapman of the US Bankruptcy Court in New York on September 9 has authorized PAL to access the first US$20 million of its debtor-in-possession (DIP) financing totaling $550 million. The amount will be provided by parent company PAL Holdings, Inc. (PHI) and indirect equity holder Buona Sorte Holdings, Inc.
The DIP financing is part of the restructuring plan of the flag carrier, which on September 3 filed for Chapter 11 process in New York.
“This is a significant step in our recovery plan and supports our ongoing operations to continue serving our valued customers and connecting the Philippines with the world,” PAL president and chief operating officer Gilbert Santa Maria said in a statement on September 10.
“The combination of our substantial creditor support and the Court’s approvals enables us to progress toward an expedited emergence and full recovery,” he added.
PAL also received authorization to pay suppliers and trade creditors for goods and services delivered throughout the Chapter 11 process.
The airline was likewise allowed to honor and maintain all customer programs, including valid tickets and travel vouchers, Mabuhay Miles and benefits, and refund obligations.
Mabuhay Miles members can expect to continue to accrue and redeem Mabuhay Miles.
PAL will continue to pay all employee wages, compensation and benefit obligations, subject to continuation of any temporary work arrangements and maintain employee benefit programs in the ordinary course of business throughout the Chapter 11 process.
PAL’s restructuring plan is part of a series of agreements it has entered into “with substantially all” of its lenders, lessors, and aircraft and engine suppliers, as well as its majority shareholder, “to allow the company to successfully restructure and reorganize its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalized airline.”
The restructuring plan provides debt cuts of over $2 billion and a 25% reduction in fleet capacity. It includes $505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 million of additional debt financing from new investors.
Chapter 11 is a form of bankruptcy which involves a reorganization of a debtor’s business affairs, debts, and assets.
PAL noted that Chapter 11 is a globally recognized US legal process that many airlines have used to reinvent themselves into more successful companies.
Santa Maria earlier said they expect to complete the Chapter 11 proceedings by end of the year.
Philippine Airlines, Inc. is the only party included in the Chapter 11 filing; PHI and Air Philippines Corp., known as PAL Express, are not.
PAL said it will complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.