PAL plans to file for bankruptcy in New York on June 29
Philippine Airlines (PAL) ‘s planned filing of the Chapter 11 creditor protection petition in New York is set for June 29, which would mark an important milestone in efforts to save the nation’s flag carrier from the crushing losses inflicted by the pandemic.
Industry sources with knowledge of the matter told the Inquirer the date was forward-looking and could be pushed back to July.
Details on the final rehabilitation plan were not yet available, but sources revealed that PAL was aiming to exit Chapter 11 within “months” when travel restrictions were relaxed and more flyers were vaccinated.
Airlines around the world have turned to Chapter 11 filing to overcome the current crisis. PAL has delayed its own filing since Q4 2020 as it is still in negotiations with creditors and lessors.
Successful filing of a Chapter 11 petition would protect PAL’s assets, such as planes and engines, typically used as collateral in its loan agreements, from lawsuits that could further derail its path to recovery.
The carrier also hoped to obtain significant relief from lenders and lessors as other measures were initiated. This will include reducing the size of its fleet to 97 planes, overhauling its route network and suspending certain unprofitable long-haul routes.
To preserve cash resources depleted during the pandemic, parent company PAL Holdings Inc. halted debt payments as early as April last year, defaulting on its loans.
This made a significant amount of long-term debt due over the next 12 months.
PAL’s short-term bonds swelled 300% to reach 119.9 billion pesos at the end of 2020. At the same time, rental debts stood at 152 billion pesos while long-term debt amounted to 32.57 billion pesos.
PAL Holdings said in its latest regulatory filing that its largest shareholder, billionaire Lucio Tan, would raise an additional 24.25 billion pesos, half of which could come from private and government lenders. However, there are still no details on how the extra money will be collected.
Tan had already injected 17.2 billion pesos into the airline since the end of 2019 to keep the flag carrier afloat.
PAL Holdings saw its losses soar 600% to a record 71.8 billion pesos in 2020, while its first quarter 2021 loss fell 8.4% to 8.6 billion pesos.
PAL recorded a capital deficit of 74 billion pesos in 2020. This increased by 13.5% to almost 84 billion pesos in the first quarter of this year. INQ
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