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PAL Holdings shareholders ok capital hike to P30B

  • Shareholders of PAL Holdings, the parent firm of Philippine Airlines, approved the increase in PHI’s authorized capital to P30 billion
  • This is part of the flag carrier’s reorganization program
  • Shareholders also green lit the issuance of 10.2 billion shares by private placement to BuonaSorte Holdings
  • BuonaSorte Holdings will infuse US$505 million as working capital into PAL

The shareholders of PAL Holdings, Inc. (PHI), the parent firm of Philippine Airlines (PAL), approved the increase in PHI’s authorized capital to P30 billion to accommodate fresh capital infusion as part of the flag carrier’s reorganization program.

In a regulatory disclosure, PHI said its shareholders approved the amendment of the company’s seventh article of incorporation to increase authorized capital stock from P13.5 billion to P30 billion during the virtual annual stockholders’ meeting on November 25.

Also approved was the issuance of 10.2 billion shares by private placement to Buona Sorte Holdings, Inc. (BSHI).

READ: PAL parent company hikes capital to P30B

The increase in authorized capital is meant to accommodate the fresh capital infusion into the company by BSHI, an affiliate company of the Lucio Tan Group of Companies.

The new capital will in turn be invested in PAL, pursuant to the court-supervised reorganization of the flag carrier.

Earlier, PHI said BSHI will infuse US$505 million as working capital into PAL to support its reorganization plan.

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

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

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.

Upon issuance of the 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.

The capital infusion is subject to the approval of the Securities and Exchange Commission.

PHI said it expects to receive the P12.75 billion in cash from BSHI before the end of 2021.

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

PAL on September 3 filed for bankruptcy with the US 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 October 1, the US court approved on a final basis PAL’s access to its debtor-in-possession totaling $505 million.

PHI said the cash infusion and 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.

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