PAL Irons Out Final Deal with Aircraft Lessors

To File Prepackaged Chapter 11 Next Week  

21 June 2021

Flag carrier Philippine Airlines (PAL)’s will finally file for Chapter 11 bankruptcy protection in the US next week after ironing out final negotiation deals with aircraft lessors.

PAL’s filing have been delayed due to some readjustments with the creditors offer necessitating talks extending bankruptcy protection filing by the end of May to another month.

PAL president and COO Gilbert Santa Maria said the company has been managing liquidity and has returned some aircraft it cannot afford to operate.

The airline also agreed to to raise debtor-in-possession (DIP) financing of $505 million, broken down into $250 million of debt and $255 million of convertible debt. 

DIP secured financing during the course of a bankruptcy case is often crucial to the debtor's prospects for either maintaining operations pending the development of a confirmable plan of reorganization or facilitating an orderly liquidation designed to maximize asset values for the benefit of all stakeholders. 

In a Chapter 11 case, financing (and/or cash infusions through recapitalization) also is often a key component of the reorganized debtor's ability to operate post-bankruptcy. 

An exit financing of about $150 million is also sought by the airline for payment to creditors. The availability of adequate exit financing is often a condition to confirmation of a plan of reorganization. Reorganized debtors use exit financing to pay creditors' claims under the plan and to fund their ongoing operations after bankruptcy.

PAL said it was considering all options available, including a comprehensive restructuring plan that would ensure its viability and continued operations.