A United States bankruptcy court has allowed Philippine Airlines, Inc. to access the remainder of its debtor-in-possession (DIP) financing of $505 million.
US bankruptcy court judge Shelley C. Chapman issued the “final order” authorizing PAL to obtain “post-petition financing” on Sept. 30 after the “second day hearing” held that day, according to court documents from PAL’s claims agent Kurtzman Carson Consultants LLC.
PAL’s DIP financing is composed of a multi-draw term loan facility of $250 million — access to $20 million of which was approved by the bankruptcy court recently — and another multi-draw term loan of $255 million.
PAL in a press release said the long-term equity and debt financing, as part of the flag carrier’s restructuring, will support the company’s ongoing operations and recovery plan.
“This important step confirms that our recovery process is on track as we continue to work hard on securing a fully consensual reorganization plan in an efficient manner,” PAL President and Chief Operating Officer Gilbert F. Santa Maria said.
Nilo Thaddeus P. Rodriguez, PAL chief financial officer, said the approval gives the company additional liquidity to meet current and future obligations – and to operate as usual.
“PAL will emerge a leaner and more competitive airline thanks to our hardworking employees, the resolute commitment of our majority shareholder and the strong support from our stakeholders and creditors,” he said.
The court also authorized PAL, “but not directed,” to pay “some or all” of the pre-petition claims of “critical” and foreign vendors in an aggregate amount not exceeding $73 million.
The motion seeking authorization to pay certain employee wages and other compensation and related obligations as well as maintain and continue employee benefits and programs in the ordinary course was also granted on a final basis.
At the same time, the court also allowed PAL, “but not directed,” to fulfill and honor its obligations to customers and related third parties.
PAL can “continue, renew, replace, implement new and/or terminate any Customer Program or Commercial Agreement… in the ordinary course of business, without further application to the court, including making all payments, satisfying all obligations, and permitting all setoffs in connection therewith, whether relating to the period prior to, on, or subsequent to the petition date.”
PAL said last week that it had filed a petition before a Pasay City court seeking recognition of the proceedings and decisions of US Bankruptcy Court for the Southern District of New York that is hearing its Chapter 11 case.
The “First Day Motions” hearing took place on Sept. 9. The airline won the court’s approval to access the first $20 million of its DIP financing totaling $505 million.
Mr. Rodriguez has said that the airline expects to exit its recovery phase by 2022, with operating activities seen to “generate more consistent positive monthly cash flow.” — Jenina P. Ibanez and Arjay L. Balinbin