Bilyonaryo Lucio Tan is willing to let down the drain the $488 million (P24.4 billion) he has already sunk into his debt-ridden Philippine Airlines (PAL) as long as the United States Bankruptcy Court for the Southern District of New York approves the flag-carrier’s bailout plan.
“As of the petition date, Buona Sorte has agreed to waive any recovery with respect to its prepetition unsecured loans under, and subject to confirmation of, the proposed plan,” said PAL CFO Nilo Thaddeus Rodriguez in a petition with the NY Court.
Rodriguez said Tan pumped in $225 million in late 2019 as part of PAL’s turnaround plan through his Buona Sorte. PAL amassed P22 billion in losses from 2017 to 2019.
He said Tan pumped in another $133 million in emergency advances to PAL from March to August 2020 during the lockdown following the COVID-19 pandemic. These unsecured cash infusions are on top of the $100 million bridge financing provided by Buona Sorte to PAL in the first half of 2021.
Buona Sorte owns 60 percent of Trustmark Holdings (the remaining 40 percent is owned by Tan’s British Virgin Islands Horizon Global Investments), the 77 percent owner of PAL Holdings, the airline’s publicly-listed parent company.
PAL has filed a Chapter 11 protection last September 3 in order to implement its rescue plan anchored on a $505 million debtor-in-possession (DIP) financing for the airline to be shouldered by Tan.
Under the DIP, Buona Sorte would lend $250 million to PAL in Tranche A with PAL Holdings lending another $255 million in Tranche B. The loans will have an interest of 9.5 percent per annum.
The DIP facility will provide an immediate cash infusion of $20 million to PAL (which warned its cash was only good up the third week of this month), repay Tan’s $100 million bridge loan, and improve the airline’s liquidity to enable it to survive the pandemic until the market’s projected recovery in 2025. PAL is also planning to raise another $150 million in debts from new investors.
PAL claimed it has obtained support from 90 percent of its lenders, lessors, and suppliers for its bailout plan which includes cutting debt by half or $2.1 billion and reducing its fleet by 25 percent to 70 planes.