Bankrupt Philippine Airlines (PAL) has “voluntarily” filed for Chapter 11 protection in the United States after its owner, bilyonaryo Lucio Tan, finalized a bailout deal with “substantially” all of its lenders, lessors, and aircraft and engine suppliers committed to make the flag carrier “leaner and better-capitalized.”
Under the .restructuring plan, which is subject to approval of the Southern District Court of New York, PAL’s creditors agreed to give Tan $2 billion in “permanent balance sheet reductions” which would enable it to “consensually contract fleet capacity by 25 percent.”
The bailout plan also required Tan to raise $505 million in long-term equity and debt financing and $150 million of additional debt financing from new investors.
PAL said it would make a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010.
“We welcome this major breakthrough, an overall agreement that enables PAL to remain the flag carrier of the Philippines and the premier global airline of the country, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world,” said Tan in a statement.
“We are grateful to our lenders, aviation partners and other creditors for supporting the plan, which empowers PAL to overcome the unprecedented impact of the global pandemic that has significantly disrupted businesses in all sectors, especially aviation, and emerge stronger for the long-term,” he added.
PAL said it would continue to operate flights and meet its current financial obligations throughout the bailout process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.