Philippine Airlines Inc. (PAL) today (September 10, 2021) announced that the United States Chapter 11 court approved all “First Day” motions on an interim or final basis for its voluntary restructuring, following petitions filed on September 3, 2021.
This is the initial step to pare off $2.1 billion of the flag carrier's $6 billion debts.
Indeed, “This is a significant step in our recovery plan and supports our ongoing operations," remarked Gilbert F. Santa Maria, PAL President & Chief Operating Officer.
"The combination of our substantial creditor support and the Court’s approvals enables us to progress toward an expedited emergence and full recovery," he explained.
Orders from the U.S. Bankruptcy Court for the Southern District of New York allowed PAL to operate in the normal course, ensuring it can continue serving customers as a full-service airline and the flag carrier of the Philippines.
Specifically, the court authorized PAL to honor and maintain all customer programs, including valid tickets and travel vouchers, Mabuhay Miles and benefits, and refund obligations.
The court also authorized PAL to pay ongoing suppliers and trade creditors in the ordinary course for goods and services delivered throughout the Chapter 11 process.
PAL will continue to pay all employee wages, compensation and benefit obligations.
The bankruptcy court judge allowed PAL to access the first US$20 Million of its debtor-in-possession financing totaling US$505 Million.
The US$505 Million facility is from PAL's controlling shareholder, Buona Sorte Holdings Inc., owned by the family of tycoon Lucio Tan.
Buona Sorte will condone several hundred million dollars of unsecured loans it provided to PAL as emergency advances to keep the flag carrier afloat when the pandemic wrought havoc on the global airline industry.
Buona Sorte is expected to keep its majority stake in PAL post restructuring.
Throughout the Chapter 11 process, it will be business as usual for PAL.
PAL has been negotiating with creditors, aircraft lessors and equipment suppliers for a year and over 90 per cent of them supported the airline's restructuring scheme.
PAL lost $2 billion revenues after pandemic travel restrictions crippled the airline industry.
“PAL was compelled to halt all commercial operations and cancel thousands of scheduled domestic and international flights, resulting in billions of dollars in losses,” Chief Financial Officer Nilo Rodriguez declared before the bankruptcy court.
PAL opted to file for Chapter 11 in the U.S. because creditors and stakeholders were familiar with the process, according to PAL financial adviser Doug Walker. "It made sense to offer a mechanism that was known to them.”