Andrzej Jeziorski/SINGAPORE
Philippine Airlines' (PAL) creditors have agreed to resume talks to rework the airline's rehabilitation plan, after overwhelmingly rejecting it in their initial analysis, according to the Philippine Securities and Exchange Commission (SEC).
The announcement follows Philippine President Joseph Estrada signing an executive order making the SEC directly answerable to him, instead of to the Department of Finance.
The SEC's chairman, Perfecto Yassay, previously warned that PAL would be shut down if the airline's rehabilitation plan, presented to the commission in December, proves to be inadequate. In stark contrast, Estrada has publicly stated that the airline would be preserved "at all costs", and that no more PAL employees would lose their jobs.
The airline owes over $2.1 billion to more than 9,000 creditors, and has been in receivership since June under an order from the SEC blocking creditors from seizing its assets. Its rehabilitation plan calls for fleet downsizing to 22 aircraft, partial resumption of debt repayments, the sale of non-core businesses and a $150 million shareholder cash injection. It also assumes that a strategic partner will be brought in to help run the airline in due course. Most of PAL's creditors, including the US Exim bank and European creditors, have declared the plan unworkable without the help of a foreign airline partner.
The four senior ex-Cathay executives hired via newly formed consultancy Regent Star Services to try to save PAL have started work in senior management positions in Manila.
No potential partner has emerged since Cathay Pacific Airways pulled out of advanced talks in December. PAL chairman and majority shareholder Lucio Tan is, however, reportedly in talks with four unnamed international investors over the sale of up to 40% of the airline, according to an announcement by finance secretary Edgardo Espiritu. Tan is believed to be losing some 25 million pesos ($660,000) a day keeping PAL running.
Most recently, Japanese trading house Marubeni announced plans to halt financing arrangements on two Airbus A320s after rejecting the plan for writing off interest charges owed to PAL's financiers. Shortly before, Japan's Dai-Ichi Kangyo Bank (DKB), had slammed the plan for providing inadequate cash flow projections, making it impossible to calculate the risk involved in keeping up financial links with the airline.
Source: Flight International
