PAL OKs capital infusion, new board of directors

MANILA, Philippines—The board of Lucio Tan-controlled Philippine Airlines (PAL) has officially approved the plan to infuse additional capital into the financially troubled flag carrier which will result in the billionaire businessman raising his stake in the firm to almost 90 percent.

At the same time, the publicly listed holding firm told the Philippine Stock Exchange (PSE) on Tuesday (Nov. 2) that a new set of directors was appointed to oversee the airline as it struggles to regain its footing amid ongoing bankruptcy proceedings in US courts.

In a disclosure, PAL Holdings Inc. told the bourse that the airline’s board of directors for the year ahead will be composed of Lucio Tan as chair and CEO; Carmen Tan, Rowena Chua, Lucio Tan III, Florentino Herrera III, Mark Chen and Junichiro Miyagawa as directors; Leonardo Alejandrino, Johnip Cua, Juan de Zuñiga Jr. and Samuel Uy as independent directors; and Gilbert Santa Maria as director, company president and COO.

At the PAL stockholders’ meeting held last week, the board also approved the appointment of SGV & Co. as the airline’s external auditor for 2021-2022.

The board also approved an amendment to its articles of incorporation reducing the par value of its authorized capital stock from P1 to P0.001, effectively diluting the shares of its existing shareholders, and restoring the par value to P1 to accommodate the capital infusion from Tan which had been announced earlier.

Last week, the airline announced that it will receive another lifeline from Tan via his Buona Sorte Holdings Inc. (BSHI) which, alongside other entities controlled by the taipan, will increase their combined stake to 89.49 percent from 80 percent after a P12.75-billion ($255 million) cash injection.

The parent firm said this will be done through the issuance of 10.2 billion new shares to Buona Sorte—a transaction that requires the go-signal from the Securities and Exchange Commission and shareholders. PAL Holdings’ shareholder ANA Holdings of Japan will not participate in the capital call, and will thus see its 9.5 percent stake cut by half.

Buona Sorte Holdings will separately extend a $250- million five-year term loan to Philippine Airlines Inc., which is 99 percent owned by PAL Holdings.

“The Lucio Tan Group is committed to support PAL’s overall plan to position itself for the post-pandemic environment,” PAL Holdings said in the filing.

“To this end, the Lucio Tan Group, through the BSHI private placement with issuer and the loan to be extended by BSHI to Philippine Airlines, is ready to underwrite a substantial portion of the financial burden to assist Philippine Airlines in its recovery plan,” it added.

The combined $505 million debt and equity injection would be used by PAL Inc. as “working capital” and was a key feature of its Chapter 11 bankruptcy protection plea in the United States.

The Chapter 11 petition will allow PAL to eliminate $2.1 billion in aircraft-related debt, restructure its business and downsize its fleet to ensure sustainable operations upon emerging from the process.

TSB