A different kind of turbulent weather is haunting the restructuring program of Philippine Airlines (PAL). I heard the flag carrier’s top honcho Gilbert Sta. Maria and PAL independent member of the board Gregorio “Greggy” Yu flew to New York but at the last minute decided to hold off the filling of Chapter11.
What gives? Is the decision to defer the filling led to the resignation of Mr. Greggy? As an accomplished banker, Mr. Greggy was given the draconian responsibility of chairing the rehabilitation committee.
He was also in-charge of negotiating with the creditor banks as well as the fund raising campaign of some $400 million, a big chunk of the $505 million PAL needs as fresh capital to keep the flag carrier afloat.
On Monday, the board accepted Mr. Greggy’s resignation. The current talk circulating around the PAL corridors is that Lucio ‘Hun Hun’ Tan III, a third generation Tan and grandchild of the cigarette tycoon, Lucio “Kapitan” Tan, will now be steering the rehab committee. Mr. Hun Hun is a member of the board of the flag carrier and is the vice president of PAL Holdings.
The outstanding issue now is: what route will PAL finally take? Relative to this is, if Chapter 11 is out of the horizon, will the airline company be adopting FRIA, instead?
Republic act 10142, otherwise known as FRIA (short for Financial Rehabilitation and Insolvency Act of 2010), covers the rehabilitation or liquidation of debtors. It provides a timely, fair, transparent, effective, and efficient rehabilitation designed to preserve and maximize the value of the assets of the debtors, including the recognition of the creditor rights as well as ensure equitable treatment of creditors.
As an alternative to doing it in New York, my source told me FRIA could now be a better route because it’s less financially burdensome. In the rehabilitation plan crafted with the assistance of SeaBury, an aviation and aerospace financial specialist, some $505 million is needed as fresh capital infusion.
To date, Kapitan has already poured in $100 million, which has bankrolled PAL’s operating expenses, including salaries of the airline’s workforce. Under Chapter 11, Kapitan will have to come with the money, roughly a little over $400 million as a head start for PAL within two to three weeks after the filing. Based on what I heard from the banking community, three major banks – Asia United Bank, China Bank, and Bank of the Philippine Islands, have agreed to lend $75 million each, fully collateralized by fixed assets of LT Group of companies.
Although the financial package has been approved in principle by the three banks, there’s a certain “documentary requirement” which keeps the facility hanging and is reportedly among the reasons for Mr. Greggy bowing out of PAL.
The rest of the story is
here
Locked
