Debt restructuring cost PAL $3M in consultancy fees

RECOVERY A Philippine Airlines B777 from London lands at Ninoy Aquino International Airport Terminal 1. PAL exited Chapter 11 proceedings after only four months. —FILE PHOTO

Philippine Airlines (PAL) successfully restructured crippling debts and exited a US Chapter 11 bankruptcy process in just four months with a steady management team at the helm and the full financial backing of owner, billionaire Lucio Tan.

The flag carrier was also aided by a small army of international legal and financial consultants, who earned fees of almost $3 million (P150 million) advising the carrier during the creditor protection plea, a recent filing before the Chapter 11 Court showed.

The payments include $1.34 million to Debevoise & Plimpton LLP, which rendered legal services and advice on obtaining financing during the bankruptcy plea.

Another $640,167 was paid to Seabury Securities LLC and Seabury International Corporate Finance LLC.

Seabury was chosen for its expertise “working with financially troubled companies in complex financial restructurings both out of court and within chapter 11 case.”

Its role included helping PAL finalize a new business strategy, raise money and implement “major creditor concessions” necessary for the airline’s recovery.

Another $582,402 was paid to Norton Rose Fulbright (Asia) LLP, which provided special aviation financial advice, and $389,632 to administrative agent Kurtzman Carson Consultants LLC. Strikeman Elliot, which provided advisory services in Canada, earned a fee of $25,695.

PAL’s domestic legal and financial consultants included Angara Abello Concepcion Regala & Cruz Law, Laguesma Magsalin Consulta & Gastardo, Quisumbing Torres and Zambrano & Gruba Law Offices although their fees were not indicated in the filing.

Following its exit from Chapter 11 at end of 2021, PAL successfully wiped out $2.1 billion in aircraft-related debts and committed to streamline its business, which also involved the return of planes and cancellation of unprofitable routes.

PAL also indicated plans to raise additional financing of up to $150 million. However, it was unclear if the aforementioned advisors would be retained during this process.

Last Jan. 31, PAL announced the abrupt resignation of Gilbert Santa Maria, who led PAL through the challenging pandemic era up to its successful exit from Chapter 11.

He was replaced by Capt. Stanley Ng, Tan’s son-in-law and PAL chief operating officer for airline operations, who will act as officer-in-charge for the next six months until a qualified president is appointed.

Meanwhile, PAL told the US court it continued to record financial losses since its Chapter 11 plea was filed at the start of September last year.

From Sept. 3 to Dec. 31, PAL booked a $36.13-million loss and revenues of $542 million. No comparative figures were provided.

The losses during the Chapter 11 period were blunted by a $32.97-million profit in December 2021—a traditionally strong period for the airline business because of the Christmas holiday season.

Before the discovery of the Omicron coronavirus variant last month, PAL’s management was projecting a return to profitability as early as 2022.

It earlier told the US Chapter 11 court that revenues this year will reach $2.1 billion, going up to $2.46 billion in 2023 and $2.59 billion in 2024. It also forecast a net income of $145 million in 2022, $312 million in 2023 and $379 million in 2024.