Lucio Tan averts PAL closure in September after court OKs $20M in financing

In a statement, PAL said the Bankruptcy Court for the Southern District of New York allowed PAL to draw up up to $20 million from a $505 million loan facility led by the flag carrier’s controlling shareholder, bilyonaryo Lucio Tan’s Buona Sorte Holdings Inc.

READ: Gasping for air: PAL says it won’t last beyond September if it doesn’t get $20M in fresh cash from Lucio Tan

PAL earlier said it needed an immediate fresh capital infusion to continue as a going concern or it would be forced to close down by the third week of September.

Cash has been scarce amid an unprecedented slump in passenger demand and travel restrictions. From $43.07 million in 2020, the airline’s cash pile has shrunk by half to $21.8 million.

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PAL said the US court’s approval marks an important step forward in its recovery plan, which is aimed at reducing the company’s debt by $2 billion.

READ: PAL expects to emerge from bankruptcy before year-end

The move will also allow PAL to continue to operate flights in the normal course of its business and meet all its current financial obligations throughout the Chapter 11 process to employees, customers, the government, and its lessors, lenders, suppliers and other creditors.

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“The combination of our substantial creditor support and the court’s approvals enables us to progress toward an expedited emergence and full recovery. As travel demand increases and restrictions ease, we continue to increase domestic and international flights, while maintaining the safety and health of our passengers and employees,” said Gilbert F. Santa Maria, PAL president and COO.

READ: PAL defends bankruptcy filing: Many airlines used Chapter 11 to reinvent themselves into more successful firms

The approval also allows PAL to maintain all customer programs, including valid tickets and travel vouchers, Mabuhay Miles and benefits, and refund obligations.

READ: Lucio Tan cheers Chapter 11 filing as ‘breakthrough’: PAL to cut fleet by 25%, debt by $2B; raise $655M in new equity, borrowings