In this photo taken on September 13, 2016, shows Philippine Airlines planes are parked at the international airport of Manila. (Photo by TED ALJIBE / AFP)
Taipan Lucio Tan’s PAL Holdings Inc. wants to have its eight-month trading suspension lifted by the Philippine Stock Exchange (PSE) after subsidiary Philippine Airlines Inc. successfully restructured debts and exited from US Chapter 11 bankruptcy proceedings at the end of 2021.
In a published notice, PAL Holdings said it would reissue its 2020 financial statements, including an “updated” report from external auditor SyCip Gorres Velayo & Co. (SGV), to reflect completed negotiations with creditors and lessors that resulted in the reduction of $2.1 billion debts.
The PSE suspended trading of PAL Holdings’ shares on June 18 after SGV raised red flags on PAL’s financials and refused to render an opinion on the company’s 2020 report showing staggering pandemic-induced losses of P71.8 billion and a P74-billion capital shortfall.
In an attached disclaimer of opinion, SGV partner Catherine Lopez explained “we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements.”
Meanwhile, PAL Holdings said in its published notice the refiling of its 2020 financial statement would include the confirmation of its Chapter 11 plan of reorganization and additional information on its financial restructuring.
The lifting of the trading suspension was also a key consideration of PAL’s creditors, an undisclosed number of whom agreed to convert debts owed to them into shares of PAL Holdings.
In an earlier filing, PAL Holdings said it was targeting to complete the share swap process within the first quarter of 2022.
Restructuring
PAL’s restructuring was supported by PAL Holdings’ capital increase from P13.5 billion to P30 billion and the issuance of 10.2 billion shares to Tan’s Buona Sorte Holdings Inc. for the infusion of added financing into the operating company.
PAL’s legal counsel, Angara Abello Concepcion Regala & Cruz Law Offices (Accralaw), underscored the role Philippine government counterparts played in helping clear the flag carrier’s path to recovery.
Francisco Ed Lim, Accralaw senior legal counsel, cited the support of the Pasay City Regional Trial Court and Securities and Exchange Commission (SEC).
“The SEC acted swiftly in approving the amendments of PAL’s articles of incorporation to accommodate the debt-to-equity conversion agreed upon between PAL and some of its creditors,” Lim told the Inquirer.
“The swift action by the SEC enabled PAL to emerge or exit from the US bankruptcy proceeding before the onset of 2022,” he added.
Following its exit from Chapter 11, PAL 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.