PAL revealed that it needed an “immediate capital infusion” to sustain its operations and fund its Chapter 11 case filed in New York on September 3.
The flag carrier said its cash dwindled to $21.8 million at the end of August from $43.069 million at year-end 2020.
“If the debtor (PAL) cannot quickly access the proposed interim draw pursuant to the DIP facility of $20 million, based on the debtor’s financial forecasts, the debtor will not be able to continue to operate its business beyond the third full week in September,” said PAL counsel Debevoise & Plimpton based on a 13-week cashflow projection.
The flag carrier is seeking approval from the United States Bankruptcy Court for the Southern District of New York for its DIP plan, a crucial component in PAL’s bailout which includes cutting debt by $2 billion and reducing its fleet from 90 to 70.
The DIP plan would inject $505 million in equity and debt from Tan’s Buona Sorte Holdings to refinance the $100 million bridge loan previously extended by Tan; fund working capital, capital expenditures, payroll obligations; pay suppliers, cover overhead costs; and make other payments essential to keep PAL afloat.
“The ability to make these payments when due is essential to the continued operation of the debtor’s business during the pendency of this Chapter 11 case,” said Debevoise & Plimpton.
“Likewise, if the debtor does not have access to the full DIP facility of $505 million later in the Chapter 11 case, it would not be able to continue operating in the ordinary course more than a few weeks after the interim funding,” the counsel added.
With the fresh cash, PAL told the court it would be able to bring its operations back to normal and weather any setbacks from the“ever-evolving” pandemic and changes in fuel prices.
PAL admitted that its current operations would not be enough to generate “sufficient levels of operating cash flows in the ordinary course of business to cover either its operating costs going forward or the projected restructuring costs of the Chapter 11 Case without the DIP facility.”
The Tan-led airline is currently operating at 20 percent of its pre-pandemic flights, serving only 70 percent of its total destinations. It expects to generate just a third of its 2019 revenues of P154 billion this year.