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The Pasay City Court granted Philippine Airlines’ petition for recognition of the airline’s bankruptcy proceedings in the US
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The Pasay City Special Commercial Court handed down the decision in a ruling dated October 22
The Pasay City Court has granted Philippine Airlines’ (PAL) petition for recognition of the airline’s bankruptcy proceedings in the US, PAL parent firm PAL Holdings, Inc. (PHI) said in a regulatory disclosure on October 29.
The Pasay City Special Commercial Court in a decision dated October 22 said recognition of the Chapter 11 proceedings “does not affect the right of Philippine creditors to commence or continue a rehabilitation or liquidation proceeding under the FR (financial rehabilitation) Rules or the right to file or continue claims proceedings.”
In response, PHI said: “While it is true that the recognition of the Chapter 11 proceedings does not affect the right of Philippine creditors to commence or continue a rehabilitation or liquidation proceedings under the Financial Rehabilitation Rules, PAL strongly believes, and does not expect, that there will be any proceedings to be initiated by creditors because of the pre-arranged nature of the case. It is to be noted that there had been no objection recorded from the creditors in both the US Chapter 11 and Pasay Court cases.”
Last September 20, the airline filed a petition for local courts to formally recognize the Chapter 11 process in the US. The petition is in compliance with the Financial Insolvency and Rehabilitation Act of 2010.
READ: PAL seeks local recognition of Chapter 11 process
PAL on September 3 voluntarily filed for bankruptcy with the US Bankruptcy Court in New York to implement a restructuring plan.
READ: PAL files for bankruptcy in US
The restructuring plan is part of a series of agreements the airline has entered into 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 in permanent balance sheet reductions from existing creditors and allows the airline to reduce fleet capacity by 25%. It also includes US$505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 million in additional debt financing from new investors.
On October 1, the US court approved on a final basis PAL’s access to its debtor-in-possession financing totaling $505 million.
PHI said Lucio Tan, Sr.’s Buona Sorte Holdings, Inc. will infuse $505 million as working capital into PAL to support its reorganization plan.
READ: Lucio Tan’s firm sinks $505M in PAL’s reorganization
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 conversion, which is targeted to be filed in the latter part of the year.
