Promising a comeback in 2022, PAL woos creditors to OK rehab plan

Philippine Airlines (PAL) creditors are set to vote whether to accept the flag carrier’s Chapter 11 plan, which was deemed crucial to its recovery.

Filed on Sept. 3 in the United States, the Chapter 11 plea aims to remove $2.1 billion in debts, reorganize the company’s business and allow the infusion of fresh funds, mainly from PAL’s controlling shareholder, billionaire Lucio Tan, and other investors.

Documents filed by PAL’s lawyers showed the voting deadline was set for Dec. 10, to be followed by a confirmation hearing on Dec. 17.

The voting is a key part of the Chapter 11 process, which PAL hopes to exit before the end of the year and emerge a “strengthened airline in a more favorable economic climate.”

Among the documents filed was a disclosure statement, dated Oct. 13, that was signed by PAL chief financial officer Nilo Thaddeus Rodriguez.

Here, PAL stated that over 90 percent of creditors with Class 3 claims, or those not tied to any collateral, had agreed to support the plan in accordance with the restructuring support agreements.

Best interests

“The debtor believes the plan is in the best interests of all stakeholders and urges the holders of claims in Class 3 to vote in favor thereof,” Rodriguez said.

He explained PAL had evaluated alternatives, including the sale of some of its assets and the effects of a “hypothetical” closure of business and liquidation under a Chapter 7 process.

PAL concluded that its Chapter 11 plan was still in the best interest of creditors that were entitled to vote.

The carrier was also required to prove the plan was feasible and the completion of the Chapter 11 process would “not likely be followed by the liquidation or the need for further financial reorganization.”

In the disclosure statement, PAL projected revenues next year to reach $2.1 billion, going up to $2.46 billion in 2023 and $2.59 billion in 2024.

PAL also forecast a return to profitability next year, with net income projected at $145 million in 2022, $312 million in 2023 and $379 million in 2024.

PAL said the earnings outlook was based on management’s “best efforts to forecast the demand of customers for the company’s flight and cargo services during the projection period, while taking into account the prolonged impact of the COVID-19 pandemic.”

To support operations, management also assumed to raise under an exit facility $150 million in secured loans and another $250 million in unsecured debt, PAL said in the disclosure statement.