Lucio Tan launches $ 505 million lifeline to PAL


Lucio Tan —PHOTO FILE

Billionaire Lucio Tan has launched another lifeline for Philippine Airlines (PAL) – which will also strengthen its hold over its publicly traded parent company, PAL Holdings Inc. – with a new injection of capital to keep the national carrier in business. financial difficulty in flight.

PAL Holdings said in a stock exchange filing on Wednesday that Tan’s Buona Sorte Holdings Inc. (BSHI), alongside other entities controlled by taipan, will increase their combined stake to 89.49 percent from 80 percent after 12.75 billion pesos ($ 255 million). ) injection of money.

The parent company said it would be done by issuing 10.2 billion new shares to Buona Sorte, a transaction that requires a signal from the Securities and Exchange Commission and shareholders. PAL Holdings shareholder, ANA Holdings of Japan, will not participate in the call for capital and will therefore see its 9.5% stake halved.

Fresh loan

Buona Sorte Holdings will separately provide a five-year, $ 250 million term loan to Philippine Airlines Inc. (PAI), 99% owned by PAL Holdings.

“The Lucio Tan group is committed to supporting PAI’s comprehensive plan to position itself in the postpandemic environment,” PAL Holdings said in the filing.

“To this end, the Lucio Tan Group, through BSHI’s private placement with the issuer and the loan to be granted by BSHI to PAI, is prepared to underwrite a substantial portion of the financial burden to assist PAI in its recovery plan, ”he added. .

The combined injection of $ 505 million of debt and equity would be used by PAL Inc. as “working capital” and was a key part of its Chapter 11 bankruptcy protection advocacy in the United States. The Chapter 11 petition will allow PAL to eliminate $ 2.1 billion in aircraft debt, restructure its business and reduce its fleet to ensure sustainable operations exit the process.

The transactions will be followed by a share swap that will allow PAL’s unsecured creditors to eventually acquire a stake in PAL Holdings, the filing said.

Prior to filing its Chapter 11 plea, the airline’s largest unsecured lenders included Asia United Bank ($ 75 million), Tan’s Philippine National Bank ($ 113.8 million), China Banking Corp. ($ 65 million) and Union Bank of the Philippines ($ 20 million).

PAL Holdings said in the filing that it expected most or all of the creditors to participate in the share exchange.

Delayed exit

The company has also indicated that it may exit the Chapter 11 process later than its original target by the end of 2021. He said in the filing that “exit from bankruptcy will take place upon PAI’s completion of the conversion. of the capital debt “, adding that it will be concluded during the first quarter of 2022.

Struggling with mounting financial losses even before the pandemic, PAL was forced into survival mode when the global health crisis hit in early 2020. Tan provided the standard bearer with $ 130 million in emergency cash during pandemic, however, the carrier had been bleeding financially since 2017.

Prior to filing its Chapter 11 plea, PAL had aggregate assets of $ 4.1 billion and $ 6.07 billion in liabilities with cash and its equivalents amounting to $ 31.9 million.

PAL Holdings said losses in 2020 soared 600% to 71.8 billion pesos while revenues fell 64% to 55.26 billion pesos following the collapse in demand for air travel.

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