Philippine Airlines (PR, Manila Ninoy Aquino International) has applied for voluntary pre-arranged restructuring under Chapter 11 in the US Bankruptcy Court for the Southern District of New York in order to implement an agreement it reached with over 90% of its lessors, lenders, and other creditors.
The airline pledged to continue operating normally during the period of restructuring while continuing to interact with its trade creditors and suppliers, employees, and customers.
Philippine Airlines said the restructuring plan, which is subject to court approval, includes a permanent haircut of over USD2 billion in liabilities. Among its five largest secured creditors include Apollo PK AirFinance (USD334.2 million in non-disputed, secured claims), a group of four US, Canadian, and Singaporean financial institutions with loans backed by EXIM Bank (United States of America) (USD240.1 million), the Philippine National Bank (USD156.5 million), Banco De Oro Unibank (USD80.4 million), and the China Banking Corporation (USD54.8 million). All of these claims are secured against aircraft and/or engines. The carrier's largest unsecured creditors are indirect owner Buona Sorte Holdings (USD358.3 million), regional subsidiary PAL Express (USD171.2 million), the Philippine National Bank (USD115.9 million), Rolls-Royce (USD89 million), and Lufthansa Technik (USD80.8 million).
The plan also provides for a fresh capital injection of up to USD655 million, including USD505 million in agreed Debtor-in-Possession (DIP) funding from existing shareholders and Filipino banks earmarked to sustain the carrier's liquidity during the crisis, and a further USD150 million long-term debt financing from undisclosed global financial investors for the post-COVID recovery phase. The DIP financing will convert into equity and long-term debt once the carrier exits Chapter 11.
Philippine Airlines plans to trim its fleet by 25% during the course of its restructuring. During a press conference, President Gilbert Santa Maria said this would entail returning 22 jet aircraft, but he did not go into any further detail. According to the ch-aviation fleets module, the carrier currently operates four A320-200s, eighteen A321-200s, six A321-200Ns, two A321-200NXs, fifteen A330-300s, four A350-900s, and ten B777-300(ER)s. The airline has also deferred the delivery of its remaining thirteen A321-200Ns to 2026-2030 and secured an option to cancel some of these orders.
Santa Maria said the airline has been negotiating the restructuring plan with its creditors for over a year to ensure that the complex process proceeds swiftly once the filing is made. He hopes to conclude the process and exit creditor protection before the end of this year.
In terms of its network strategy, the airline said it would focus on serving destinations in the Philippines, China, and Australia.
The airline also applied to have its Chapter 11 restructuring recognised in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010. As such, it will not undergo a separate restructuring in its home country. The filing does not cover the carrier's parent, PAL Holdings, which is stock-listed at the Philippine Stock Exchange (albeit its trading has been suspended since mid-June 2021), or regional subsidiary PAL Express. PAL Holdings owns a 98.6% stake in Philippine Airlines. Tycoon Lucio Tan indirectly controls the parent group. ANA Holdings holds a minority 9.5% of PAL Holdings.
Debevoise & Plimpton LLP, Norton Rose Fulbright US LLP, and Angara Abello Concepcion Regala & Cruz are acting as legal advisors and Seabury Securities LLC as financial advisor and investment banker to the airline. Kurtzman Carson Consultants, LLC (KCC) is the claims agent.
