US court grants PAL access to $ 20 million bankruptcy financing
September 10, 2021 | 4:45 p.m.
MANILA, Philippines – Philippine Airlines announced on Friday that it had obtained permission from a US bankruptcy judge to access the financing needed for its restructuring, in what the company called “the first step in the recovery.”
In a statement released Thursday, the loss-making national carrier, which filed for Chapter 11 bankruptcy in New York on Sept. 3, said it had obtained U.S. court approval to mine the first $ 20 million in funding by loan and equity totaling $ 505 million. .
The leave was granted by Judge Shelley Chapman of the US Bankruptcy Court in New York, according to documents.
The Chapter 11 process allows a financially troubled business to continue operating while it restructures its finances. The $ 505 million financial package, which will be raised by existing shareholders and local banks, aims to maintain the company’s liquidity during the turnaround process.
At the same time, PAL said it received permission from the US court to honor and maintain all customer programs, including valid tickets and travel vouchers, during the restructuring.
The judge also authorized the airline to pay outstanding suppliers and “ordinary” commercial creditors for goods and services, as well as keep its employees paid throughout the Chapter 11 process.
“This is an important step in our recovery plan and supports our ongoing operations to continue to serve our valued customers and connect the Philippines with the world,” said Gilbert Santa Maria, president of the company and COO.
“The combination of our substantial support from creditors and court approvals allows us to move towards accelerated emergence and full recovery,” he added.
PAL is pursuing a pre-established restructuring plan that would see more than $ 2 billion of its debts canceled and its aircraft fleet reduced by 25%. Despite operating with a reduced fleet, PAL will no longer lay off employees after the company already downsized by 30% in mid-March.
PAL officials also said that European aircraft manufacturer Airbus had agreed to postpone deliveries of new planes or cancel some of the company’s orders over the next five years. Once bankruptcy protection ends, PAL will borrow $ 150 million from new investors “to facilitate post-restructuring activities.” The airline hopes to exit the Chapter 11 process in “a few months.”
The airline run by Lucio Tan now operates 21% of pre-pandemic flights to 70% of its usual destinations. Company officials have said demand is unlikely to return to pre-pandemic levels “until 2024, 2025”. Incomes, meanwhile, are expected to return to pre-crisis levels “close to the second half of the decade”.
“As travel demand increases and restrictions ease, we continue to increase domestic and international flights, while safeguarding the safety and health of our passengers and employees,” said Santa Maria.