Philippine Airlines (PAL) has filed a petition with a local court seeking a recognition of the US Chapter 11 process the carrier has undertaken since 3 September, as well as decisions the Southern District of New York bankruptcy court may grant or award. The process of seeking recognition with a Philippine court, under the country’s Financial Rehabilitation and Insolvency Act, is in line with what PAL had stated in its Chapter 11 petition made on 3 September, and was reiterated in an amended plan term sheet filed on 21 September.
The carrier’s parent company, PAL Holdings (PALH), confirmed in a Philippine Stock Exchange (PSE) disclosure that the petition was made to a local court in Pasay City. This comes after the PSE queried PALH over a BusinessWorld report on the petition.
PALH says: “In accordance with the overall plan in regard to the filing of the Chapter 11 petition before the US Court of New York, we confirm that a petition has been filed by Philippine Airlines Inc. before a Pasay City court for the principal purpose of ensuring that the local courts will recognize formally the Chapter 11 process and the corresponding decisions the New York court may grant or award.”
As AirInsight reported on 4 September, PAL is seeking court approval for $2.1 billion reductions in aircraft-related obligations and other permanent balance sheet reductions on which it has reached an agreement with lenders, lessors, and creditors. This will partly be done through a fleet capacity reduction of 25 percent.
PAL will also see an infusion of $505 million in debtor-in-possession (DIP) funding by shareholder PAL Holdings, which will then be converted into long-term debt and equity after it exits the Chapter 11 process. It may also secure an additional $150 million in debt financing should it successfully exit the process, which will be used to facilitate post-restructuring activities.
Two hearings have been set for 30 September: one pertains to motions on restructuring support agreements, while a second hearing would be on motions covering eight areas such as customer programs, insurance, taxation, employee wages, cash management, and DIP financing.
A creditor’s meeting is also scheduled to be held on 22 October.
Meanwhile, PAL’s chief financial officer Nilo Thaddeus P. Rodriguez was quoted in the same BusinessWorld report as saying that PAL expects to “exit its recovery phase by 2022”. It also expects an operating income of $220 million in 2022 and $364 million in 2023.