Wishful thinking or not, based on its financial simulations with all things considered, Philippine Airlines (PAL) may be able to exit Chapter 11 before the year ends.
Also in the realm of possibility is the lifting of the suspension in the trading of the flag-carrier’s holding firm, PAL Holdings. The Philippine Stock Exchange (PSE) suspended its trading on account of the refusal of its independent auditor, SyCip Gorres Velayo & Co. to provide an opinion on PAL’s financial statement.
It’s called “on-going concerns”. SGV wrote that it has “not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.” Rather than a qualified and unqualified statement, no opinion from external auditors is dreaded. Simply put, it’s a reflection of the auditing firm on the business operations of a company moving forward.
It appears like PAL management is not really disturbed by the suspension because the shares are barely traded in the bourse. Despite its nonchalant demeanor, the suspension is a blemish, a stigma. It taints the image of the flag carrier, which has been travelling not through the friendly skies but turbulent weather accompanied by loud, roaring thunderstorms and sharp lightning.
Following the filing of Chapter 11, PAL management can now revise-submit its financial statement, which will then be the basis for SGV to issue an opinion.
Despite the positive developments going its way, PAL has never been wanting of misperceptions and mixed-up. Again, PSE has called its attention. PAL President and CEO Gilbert “GSM” Sta. Maria said: “I don’t anticipate anything other then an asteroid hitting Manhattan… stopping us from exiting.”
In actuality, it was not GSM who responded but Ma. Cecilia Pesayco of PAL Holdings, saying it was a “statement of hope and wish,” an “optimistic view” and there’s “no certainty that the judicial proceeding will terminate quickly.”
I see nothing wrong with being optimistic. Maybe it was the manner by which the answer was dished that could have led to misinterpretation and misunderstanding.
As I’ve said before I’m an avid PAL watcher and a loyal rider of the all-service network airline. I’ve watched the video farmed out by the spinners of the flag-carrier. Nowhere was GSM in the video but the Kapitan, himself, cigarette tycoon sitting beside Lucio “Hun” Tan III, the son of the late Lucio “Bong” Tan, Jr. and Dexter Lee, senior vice president and strategic planning officer of PAL. It was in that video on restructuring that the airline executives talked about exiting Chapter 11 soonest.
I believe the misunderstanding stemmed from lack of transparency on the part of the management to disclose the salient features of after the exit, and its outstanding liabilities.
The financial restructuring calls for creditors and suppliers to have a haircut that totals $2 billion, which will reduce to $3 billion PAL’s outstanding obligations from $5 billion.
It is also heard from the banking community that Bank of the Philippine Islands (BPI) backed-out of the lending facility due to the “comfort letter’ issue. In its stead, China Bank, Philippine Bank of Communication and Asia United Bank, each poured-in $75 million and $25 million from Sterling Bank. The exposure of these four banks is fully collateralized with prime assets owned by LT group of companies. Completing the $505 million required new money will be coming from no less than Kapitan, himself.
Another fund-raising drive is currently in the works since PAL needs $150 million to bankroll its operations. Also heard from the banking community that Land Bank of the Philippines and the Development Bank of the Philippines are willing to lend, a 360 degrees turn around from no-no policy in the past.
Finance Secretary Carlos “Sonny” G. Dominguez has a sweet spot for the flag carrier. He chairs both financial institutions. It was also said that Dominguez fully supports the Chapter 11 move and is willing to assist in the financial recovery of PAL that he steered in 1993-1995.
Joining the local banks are foreign lending institutions, which have already signify intention to participate in the exit facility.
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