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Manila Bulletin devider Business devider No longer up in the air

No longer up in the air

Published Apr 30, 2021 06:00 am

Slowly but surely the rehabilitation plan of flag-carrier Philippine Airlines (PAL) is taking its final shape. 

The whole framework of the rehab plan is now in its concluding phase as one major prerequisite, the projected liquidity position of PAL, is underway..

A central issue in the plan is the liquidity position of PAL moving forward. I heard from the banking community that Bank of the Philippine Islands, China Bank, Philippine National Bank and Asia United Bank have indicated their willingness to lend to the flag carrier.

It's an easy undertaking because the banking system right now is awash with money arising from the series of moves of the Bangko Sentral ng Pilipinas (BSP) such as the cut in key overnight interest rates and reduction in reserve requirements. All banks and financial institutions are now brimming with liquidity.

It’s BSP’s way of helping the domestic economy weather the collateral effects of the lockdowns, which like the virus has mutated from ECQ to MECQ to GCQ, MGCQ and now the latest flex (short for flexible) MECQ as coined by Metro Manila Development Authority Chair Ben Abalos, Jr.

Literally, it’s easy to pool the needed $250 million loan from these domestic banks.

Cigarette tycoon Lucio “El Kapitan” Tan, through his LT Group (LTG) of companies, is the main borrower. The facility will be fully collateralized by prime assets. El Kapitan will then infuse the fresh funds to the coffers of PAL. 

This simply means that El Kapitan is not entertaining any notions of being diluted, much more giving up steering the flag carrier.The Tan family must still own 66 percent in order to control the airline.

Compliance to other requirements are being threshed out and are believed to be non-deal breakers. The flag carrier’s management has engaged the services of international corporate advisory and aviation consulting firm Seabury, to draw up a comprehensive financial restructuring and rehab plan.

Seabury, which is under the umbrella of Accenture, is an expert in aviation and airline industry. It specializes as well in finance and investment banking with core competency in aviation, aerospace and defense maritime and financial services. 

Helping out on the domestic side is SGV & Co. accounting firm. With all major and minor kinks ironed out, the PAL management is looking at the “third week of May” for the Chapter 11 filing in New York, which should have been done last month under the original timetable. Guesstimates placed at $5 billion PAL’s total liabilities to both foreign and local creditors, including lessors and suppliers.

 In all these discussions, ANA Holdings, Japan’s largest airline group that owns All Nippon Airways which holds a 9.5 percent stake in PAL has been supportive of the rehab plan. “ANA goes along with all the decisions,” shared my muted source. 

 PAL’s rehabilitation plan is no longer up in the air. In fact, it appears that the nimbus clouds that veiled the horizon, causing turbulence, are slowly dissipating, giving way for PAL to once soar and keep flying the friendly skies. 

Talkback to me at [email protected]

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FIL C. SIONIL
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