MANILA, Philippines – Flag carrier Philippine Airlines (PAL) has secured a US court’s approval to start its recovery plan which, for starters, will remove $2 billion from its debt.
“The consensual plan was accepted by 100% of the votes cast, which were from PAL’s primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair, and overhaul service providers, and certain funded debt lenders,” PAL said in a statement on Saturday, December 18.
PAL said the recovery plan “provides for over $2 billion in permanent balance sheet reductions from existing creditors.”
“Today’s court approval represents a critical moment in our journey to emerge as a stronger airline. We are thankful for our loyal customers, dedicated employees, and the support of our shareholders and partners and government, which has enabled us to move efficiently through the process and reach this milestone,” said PAL president and chief operating officer Gilbert Santa Maria.
PAL filed for bankcruptcy protection before the US Bankruptcy Court of the Southern District of New York in September, through what is called the Chapter 11 process. Under this process, the debtor – PAL in this case – seeks approval for a reorganization plan to keep the company afloat, and pay its debts over time. A Chapter 11 petition is approved by the court if it gets creditors’ votes, and PAL in this case, obtained 100% of the votes.
The process involves debt discharge, or removal of debt, in the context of bankruptcy if the petition is accepted.
The court earlier allowed PAL to access its $505-million debtor-in-possession (DIP) financing.
“The Plan provides for over US$2.0 billion in permanent balance sheet reductions from existing creditors, allows PAL to consensually contract fleet capacity by 25%, improves PAL’s critical operational agreements and includes US$505 million investment in long-term equity and debt financing from PAL’s majority shareholder,” PAL said in its statement.
PAL suffered a P73-billion loss in 2020 – its fourth straight year in the red – after the COVID-19 pandemic’s crushing impacts on the aviation industry.
PAL said its recovery plan is set to begin before the end of 2021, and that it has a “few more procedural steps” to complete to officially start the recovery plan.
PAL said it expects to “restore more routes and increase flight frequencies as travel restrictions ease and borders reopen.”
It is currently has flights to 32 international and 29 domestic destinations. – Rappler.com