SM Rules Out Running PAL

11 September 2014

By Jenniffer B. Austria

The SM group emerged as the biggest financier to billionaire Lucio Tan’s move to regain control of flag carrier Philippine Airlines, but a top executive said the conglomerate has no interest in venturing into the airline business.

“They have been long- time client of ours. It’s about supporting a valued client,” SM Investments Corp. vice chairman Tessie Sy-Coson said at the sidelines of Asean Business Awards Tuesday afternoon.

Sy was responding to queries on why BDO Unibank Inc., the conglomerate’s banking unit, decided to help Tan buy back a 49-percent stake in PAL owned by San Miguel Corp.

Bloomberg on Tuesday reported that Tan, the Philippines’ second-richest man, pledged shares in his companies to secure a loan from four banks to fund the acquisition of San Miguel Corp.’s stake in PAL.

Tan pledged shares in LT Group Inc., Philippine National Bank and real estate assets to secure a $750-million loan from BDO Unibank Inc., China Banking Corp., Philippine National Bank and Asia United Bank.

Sy, who is also the chairman of BDO, did not disclose the exact amount of loan which BDO and Chinabank provided to the Tan group and the value of assets Tan pledged in exchange for the loan.

Sy, however, said the value of assets collateralized by Tan represented the same amount of loan provided by the group.  She said the company was not interested in sitting in the board of PAL, despite providing the biggest loan to Tan group.

Share price of BDO on Wednesday closed at P94.50, down 0.3 percent while stock price of Chinabank gained 0.2 percent to close at P55.10 apiece.

San Miguel Corp. agreed to sell back its holdings in PAL to Tan, two years after the nation’s largest company took management control and led the carrier’s return to Europe.

San Miguel and Tan’s group signed an agreement Monday, San Miguel president Ramon Ang said in a text message.  The deal is valued at $1 billion and requires Tan to meet certain conditions within a week.

However, Sy did not disclose the loan amount extended by BDO and Chinabank to the Tan group, as well as the value of assets Tan pledged in exchange for the loan.

Sy also said they were not interested in getting a seat in the PAL board.


  1. what will happen if the US$1 billion payment required is not paid within the week required by SMC

    1. It paves the way for SMC to submit its counter offer. That means SMC will now have the opportunity to buy out the remaining 51% of LTG.