The United States Chapter 11 court has approved all “First Day” motions for Philippine Airlines’ (PAL) voluntary restructuring following petitions filed on September 3, 2021.
These approvals are an important step forward in PAL’s recovery plan, which allows PAL to reduce its aircraft-related obligations by US$2.1bn; obtain a US$505 million infusion of working capital to fund its ongoing operations during Chapter 11; optimise its fleet; and obtain US$150 million in debt financing from new investors to fund its restructuring.
PAL’s major creditors include Goshawk (Nanshi Aviation Leasing), CIT, SMBC Aviation Capital, Voyager (via Panjun Aviation Leasing entities 1,2,3), Rolls-Royce, Lufthansa Technik and many more.
“This is a significant step in our recovery plan and supports our ongoing operations to continue serving our valued customers and connecting the Philippines with the world. The combination of our substantial creditor support and the Court’s approvals enables us to progress toward an expedited emergence and full recovery. As travel demand increases and restrictions ease, we continue to increase domestic and international flights, while maintaining the safety and health of our passengers and employees,” said Gilbert F. Santa Maria, PAL President & Chief Operating Officer.
The orders granted by the US Bankruptcy Court for the Southern District of New York allow PAL to operate in the normal course ensuring that the company can continue to serve customers as a full-service airline and the flag carrier of the Philippines.
PAL received authorisation to honour and maintain all customer programs, including valid tickets and travel vouchers; pay ongoing suppliers and trade creditors; continue to pay all employee wages, compensation and benefit obligations; and importantly it is authorised to access the first US$20 million of its debtor-in-possession financing totalling US$505million.
PAL states that it will continue to operate flights normally and meet all its current financial obligations throughout the Chapter 11 process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.
Philippine Airlines Inc. is the only party included in the Chapter 11 filing; while PAL Holdings Inc., and Air Philippines Corporation, known as PAL Express, are not included in the Chapter 11 filing. PAL hopes to exit the Chapter 11 process before the end of the year.
Debevoise & Plimpton, Norton Rose Fulbright US and Angara Abello Concepcion Regala & Cruz (ACCRA) are acting as legal advisors and Seabury Securities as PAL’s financial advisor and investment banker.