PAL calls for “local recognition” of US bankruptcy court rulings
Philippine Airlines Inc. (PAL) said it has filed a petition for local recognition of the proceedings as well as US bankruptcy court rulings regarding its bankruptcy as part of its restructuring plan.
In a disclosure to the Philippine Stock Exchange on Wednesday, PAL’s parent company, PAL Holdings Inc., said the national carrier had filed a petition in a Pasay City court “for the primary purpose of ensuring that local courts will formally recognize the Chapter 11 process and the corresponding decisions that the New York court may grant or grant.
The local court filing is in line with the overall plan for filing the Chapter 11 motion in the US court in New York.
“PAL’s recognition petition in a local court is a petition that seeks to ensure that the Philippine legal system recognizes all proceedings and decisions made by the foreign court dealing with the Chapter 11 case,” the spokesperson said. PAL, Cielo Villaluna, in a statement.
Earlier this month, PAL announced that it had filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York as part of its restructuring plan.
Under agreements with creditors, PAL will guarantee approximately $ 505 million for its recovery plan upon exiting the process – the first tranche will be $ 250 million of facility debt to be reduced over the next five years, and the second tranche valued at $ 255 million. will be converted into equity.
PAL recently obtained approval from a United States bankruptcy court to begin the process of obtaining loan financing for its turnaround and restructuring plan.
In the US Chapter 11 court ruling, PAL was allowed access to the first $ 20 million of its $ 505 million “debtor-in-charge financing”.
As part of its restructuring plan, PAL aims to reduce its debt by $ 2 billion and secure $ 505 million in long-term equity and debt financing from its existing shareholders and banks.
In addition to accessing the first $ 20 million of its planned $ 505 million debt financing, the U.S. bankruptcy court has also cleared PAL to operate in the normal course, ensuring that the company can continue to serve its customers by as a full service airline and flag carrier of the Philippines. .
The national carrier has also been authorized to do the following:
- Pay outstanding suppliers and ordinary trade creditors for goods and services provided throughout the Chapter 11 process or business restructuring process; and
- Continue to pay all salaries, wages and employee benefits, subject to the continuation of any temporary work arrangements if necessary and maintain employee benefit programs in the ordinary course of business throughout the chapter process 11
The approvals mark an important step in PAL’s recovery plan, which will reduce the company’s debt by $ 2 billion and help the company recover from the impact of the global pandemic, PAL said.
PAL is confident it will exit Chapter 11 or the corporate restructuring process by the end of the year, but revenues are unlikely to return to pre-COVID-19 levels before 2025.
As part of the restructuring process, the national airline has said it will continue to operate flights in the normal course of business, in accordance with safety regulations.
The airline said it plans to continue to meet all of its current financial obligations throughout the Chapter 11 process to employees, customers, the government and its lessors, lenders, suppliers and other creditors.
PAL clarified earlier that it is the only party included in the Chapter 11 file, while its listed holding company PAL Holdings Inc. and Air Philippines Corporation, known as PAL Express, are not included in the file. of chapter 11.
The top five PAL creditors with the largest “secured claims” amounting to $ 866.09 million are the Philippine National Bank with $ 156.51 million in borrowings, Banco De Oro Unibank Inc. with $ 80.42 million dollars, China Banking Corp. with $ 54.83 million, EXIM Guaranteed Loans with $ 240.1 million, and PK Airfinance SARL with $ 334.23 million.
The airline’s 40 largest creditors with “unsecured debts” totaling more than $ 1.4 billion include the Philippine National Bank with $ 115.92 million in debt, China Banking Corp. with $ 65.27 million and Asia United Bank with $ 75.30 million. —KG, GMA News