Philippine Airlines filed a petition before a Pasay City trial court to formally recognize its Chapter 11 proceedings in New York
The New York proceedings were earlier approved by a US bankruptcy judge
The court filing ensures local courts formally recognize the Chapter 11 process in the US
Philippine Airlines (PAL) has filed a petition before a Pasay City trial court to formally recognize the flag carrier’s Chapter 11 proceedings in New York.
In a regulatory disclosure on September 22, PAL parent firm PAL Holdings, Inc. (PHI) confirmed the airline on September 20 filed a petition to ensure “local courts will recognize formally the Chapter 11 process and the corresponding decisions the New York court may grant or award.”
PAL earlier said it will complete a parallel filing for recognition of in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.
PAL on September 3 filed for bankruptcy in New York so it can implement a restructuring plan to help it survive the COVID-19 crisis. A US bankruptcy judge approved the proceedings on September 9.
The approval includes authorizing PAL to access the first US$20 million of its debtor-in-possession (DIP) financing totaling $505 million. The amount will be provided by PHI and indirect equity holder Buona Sorte Holdings, Inc.
PAL also received authorization to pay suppliers and trade creditors in the ordinary course 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, subject to the airline’s usually terms and conditions of use. Mabuhay Miles members can expect to continue to accrue and redeem Mabuhay Miles as usual.
PAL will continue 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.
PAL’s restructuring plan is part of a series of agreements it has entered into with 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 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
Philippine Airlines, Inc. is the only party included in the Chapter 11 filing; PHI and Air Philippines Corp., known as PAL Express, are not part of the filing.