4 banks funding PAL buyback

MANILA, Philippines–The group of tycoon Lucio Tan is raising $780 million to cement control of flag carrier Philippine Airlines (PAL) through a bridge financing from four big local banks, with the bulk to come from banks led by the family of taipan Henry Sy.

Tan on Monday signed a $1-billion deal to buy back the 49-percent stake of conglomerate San Miguel Corp. in PAL and take over liabilities related to a re-fleeting program, with final closing expected within a week.

SMC shares were up by 2.89 percent while shares of PAL Holdings fell by 1.67 percent at the end of trade on Tuesday after the deal was announced.

A summary of the Tan group’s funding structure plan seen by the Inquirer showed that Banco de Oro Unibank would provide $360 million in fresh financing while China Bank budgeted another $100 million, bringing total financing from SM-led banks to $460 million or about 46 percent of the total deal size. The agreement to buy back SMC’s stake was signed by Tan himself and SMC president Ramon S. Ang at the head office of BDO in Makati on Monday.

Philippine National Bank (PNB), the banking arm of the Tan group, itself committed $250 million while Asia United Bank, the banking arm of the Rebisco group, earmarked $70 million, based on the funding plan as of Monday night.

BDO will accept shares in PNB and holding firm LT Group Inc. as underlying collateral for its lending to the Tan group while China Bank and AUB will get LTG shares. Affiliate PNB, for its part, agreed to accept real estate assets as security.

There are three tranches of funding for the purchase of equity, the settlement of advances made by SMC and payment of other bank loans incurred to acquire new aircraft in the last two years.

The first tranche worth $300 million will boost funding for the group’s buyout of a 49-percent stake in PAL held by SMC. In this tranche, BDO and PNB will provide $150 million each. The second installment is the repayment of advances made by SMC to PAL. In this tranche, BDO has agreed to pitch in $180 million while China Bank committed $100 million.

The third tranche will cover the repayment of outstanding loans to PAL creditors, particularly United Coconut Planters Bank as well as SMC’s banking arm Bank of Commerce.