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The Board of Directors of PAL Holdings, Inc. approved an increase in capital to P30 billion to accommodate fresh capital by an affiliate of the Lucio Tan Group of Companies
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The new capital will be invested in subsidiary Philippine Airlines, now undergoing Chapter 11 proceedings
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A US bankruptcy judge in New York on September 9 approved PAL’s access to the first US$20 million of its debtor-in-possession financing totaling $505 million
The Board of Directors of PAL Holdings, Inc. (PHI) approved on September 27 an increase in authorized capital stock to P30 billion from P13.5 billion, PHI said in a regulatory disclosure.
The new capital, to come from an affiliate of the Lucio Tan Group of Companies, will be invested in PHI subsidiary Philippine Airlines (PAL), now undergoing Chapter 11 proceedings.
PAL on September 3 filed for bankruptcy in New York to implement a restructuring plan to help it survive the COVID-19 crisis. The plan was approved on September 9 by Judge Shelley Chapman.
READ: PAL gets US court nod to access $20M financing
The approval allows PAL to access the first US$20 million of its debtor-in-possession financing totaling $505 million. The amount will be provided by PHI and indirect equity holder Buona Sorte Holdings, Inc., a privately-held company controlled by Lucio Tan, Sr.
PAL also received authorization to pay suppliers and trade creditors for goods and services delivered throughout the Chapter 11 process.
In addition, the airline was 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 as usual.
PAL will continue to pay employee wages, compensation and benefit obligations and maintain employee benefit programs in the ordinary course of business throughout the Chapter 11 process.
On September 22, PAL petitioned a Pasay City trial court to formally recognize its Chapter 11 proceedings as part of the Financial Insolvency and Rehabilitation Act of 2010.
PAL’s restructuring plan is part of a series of agreements it has entered with 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 over $2 billion cut in loans and allows the airline to reduce fleet capacity by 25%. 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.
