With P29 Billion in Losses, PAL Reportedly Seeking Court-Backed Debt Restructuring
With billions owed to creditors, Philippine Airlines is reportedly seeking court protection as it restructures its operations to deal with its losses and unpaid debts.
According to a report by Nikkei Asia, the airlines plans to return 20 leased aircraft worth $1 billion in order to alleviate the company’s financial burden. It is also seeking to raise $505 million “for post-restructuring liquidity requirements,” and will be looking toward the courts to support this restructuring.
Finance Secretary Carlos Dominguez III is reportedly aware of this but noted that the airlines “gave no details on any assistance they may need from us.”
PAL has not yet publicly released information confirming Nikkei Asia’s report, but has stated that a disclosure will be made once details are finalized. However, the company did acknowledge that a “comprehensive recovery and restructuring plan” is in place.
According to Nikkei Asia, the debt restructuring aims to raise $505 million through “debtor in possession” financing, which will include $255 million to be shouldered or raised by PAL CEO Lucio Tan and $250 million from private and government banks.
Debt restructuring refers to renegotiating a company or institution’s debts with its creditors in order to restore liquidity and continue operations. In PAL’s case, this debt restructuring will seek court protection or government assistance.
Even prior to the pandemic, PAL struggled to break even, but the implementation of extended lockdowns and travel restrictions exacerbated PAL’s losses to a record P29 billion ($602 million) for the first nine months of 2020. This is three times the losses incurred in the same period last year, which amounted to P8.4 billion ($174 million).