Lucio Tan injects $505mn into Philippine Airlines
Buona Sorte Holdings Inc. (BSHI), an investment holding company owned by billionaire Lucio Tan, has acquired 10.2 billion new shares in Philippine Airlines (PR, Manila Ninoy Aquino Int’l) parent PAL Holdings in a private placement, injecting PHP12.75 billion Philippine pesos (USD253 million) into the cash-starved carrier, a PAL filing to the Philippine Stock Exchange revealed.
The move gives Buona Sorte, which was not previously involved in the shareholding, a 46.77% stake in the company. Two other Tan-owned entities, Trustmark Holdings Corporation and Cosmic Holdings Corporation, hold most of the remainder of the stock in PAL Holdings. While their number of shares did not change, their stakes were reduced from 76.92% to 40.95% and from 3.25% to 1.73%, respectively.
Overall, Tan’s latest lifeline to the troubled airline has taken his companies’ combined shareholding in it from 80% to 89.45%. The transaction is conditional on receiving a green light from the Securities and Exchange Commission of the Philippines and from shareholders. Minority shareholder ANA Holdings will not participate in the placement and so will see its 9.5% stake halved.
Buona Sorte Holdings will also extend a USD250 million five-year loan to Philippine Airlines Inc. (PAI), of which PAL Holdings owns 99%.
In early October, Philippine Airlines received final approval from a US bankruptcy court to access USD505 million of debtor-in-possession (DIP) financing, which is a core feature of the flag carrier’s restructuring plan.
“The Lucio Tan Group is committed to support PAI’s overall plan to position itself for the post-pandemic environment. To this end, the Lucio Tan Group, through the BSHI private placement with issuer and the loan to be extended by BSHI to PAI, is ready to underwrite a substantial portion of the financial burden to assist PAI in its recovery plan,” PAL Holdings said in its filing.
The combined USD505 million loan and equity injection will be used as “working capital”. Chapter 11, if completed, will allow the airline to eliminate USD2.1 billion in aircraft-related debt and downsize its fleet to a sustainable level.
Unsecured creditors, the biggest of which are four banks owed a combined USD274 million, will be offered a debt-to-equity conversion allowing them to gain a stake in PAL Holdings, a manoeuvre expected to conclude in the first quarter of 2022. PAL “expects most, if not all, of the creditors to participate in the swap.”
Meanwhile, PAL Holdings has confirmed that a Pasay City Court has granted Philippine Airline, Inc.’s (PAL) petition for recognition of the proceedings and decisions of a United States bankruptcy court currently hearing its Chapter 11 case.
“In a decision penned by Presiding Judge Wilhelmina B. Jorge-Wagan dated October 22, 2021, the Pasay City Special Commercial Court said the recognition of the Chapter 11 proceedings ‘does not affect the right of Philippine creditors to commence or continue a rehabilitation or liquidation proceeding under the FR (financial rehabilitation) Rules or the right to file or continue claims proceedings’,” a statement issued October 29 said.