Philippine Airlines (PAL) has received approval from the Southern District of New York bankruptcy court on a “final basis” to access a debtor-in-possession (DIP) financing worth $505 million. This will be used to support the carrier’s ongoing operations and recovery plan. As part of the DIP financing approval, PAL said in a statement that it will have access to $505 million in financing, comprising two tranches of multi-draw term loans. Tranche A loan is valued at $250 million, while Tranche B loan is valued at $255 million. 

The DIP financing can be converted to long-term unsecured debt and equity, should PAL decide to do so, avoiding the need for it to repay the loan in cash upon emergence from the US Chapter 11 process. In addition to the DIP financing approval, the court also approved restructuring support agreements between PAL and its various stakeholders, as well as multiple motions covering areas such as employee compensation, customer programmes, and vendors.

PAL’s chief financial officer Nilo Thaddeus P. Rodriguez was quoted in the statement as saying: “With approval to fully access our DIP financing, PAL has the additional liquidity needed to meet our current and future obligations and to continue operating as usual. PAL will emerge as a leaner and more competitive airline thanks to our hardworking employees, the resolute commitment of our majority shareholder and the strong support from our stakeholders and creditors. (…) We’re grateful that the Court approved our motions and noted that it was a most efficient Chapter 11 hearing for a case of this complexity.”

PAL also stressed that flights will continue to operate as per normal, and fulfil the financial obligations it has during the US Chapter 11 process.

Following the court’s approval for DIP financing, the restructuring support agreements, and other motions, PAL is set to hold a creditor’s meeting on 22 October. This will then be followed by two omnibus hearings to be held on 28 October and 17 November. 

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. Later that month, PAL filed a petition with a Philippine court seeking local recognition of the US bankruptcy protection process.

Thailand approves Nok Air’s business rehabilitation plan

Meanwhile in Thailand, the country’s Central Bankruptcy Court (CBC) on 29 September approved low-cost carrier Nok Air’s business rehabilitation plan and appointed four administrators, which includes chief executive Wutthiphum Jurangkool, to implement the plan.

Nok’s business rehabilitation plan segregates 208 creditors into 16 groups, with a total claim of nearly 27.3 billion baht. It also explained how these creditors will be repaid, as per its Stock Exchange of Thailand disclosure.

The carrier also plans to raise its capital in 2022, and it has been authorised to raise up to Baht 5 billion through the issuance of new shares. This can be used to finance its business operations, capital expenditure needs, and to repay creditors. Should Nok face temporary cash flow issues, the administrators will have the ability to implement measures such as cost reduction, negotiate for more favourable payment and credit terms, seek new working capitals, and dispose of non-core assets.

Nok adds the business rehabilitation plan will be considered “successful” should the administrators repay its creditors over a five year consecutive period from the date the CBC issued its order approving the plan, or upon Nok obtaining fresh capital or credit line that is in compliance with conditions set in the rehabilitation plan.

Nok Air was placed under Thailand’s bankruptcy protection in July 2020, as reported by AirInsight on 14 September.

Please follow and like us:
Pin Share
%d bloggers like this: