Bilyonaryo Lucio Tan has failed to obtain the green light from the Sy family’s China Banking Corp. for the restructuring of the $65 million unsecured loans owed by his bankrupt Philippine Airlines (PAL).
“Upon information and belief, ChinaBank, although not executing a restructuring support agreement (RSA) in respect of its bank loan, supports PAL ’s restructuring,” the national flag carrier said in its reorganization plan submitted to the US Bankruptcy Court for the Southern District of New York.
PAL revealed that only Tan’s Philippine National Bank (PNB), Asia United Bank, and Union Bank of the Philippines have agreed to sign the RSA prior to its filing of Chapter 11 protection on September 3.
ChinaBank accounted for 25 percent of the $274 million unsecured loans owed by PAL to local banks – $113.8 million with PNB, $75 million with AUB, and $20 million with UBP.
PAL spent months engaging “in extensive good faith negotiations to reach a consensual resolution regarding the treatment of the bank loans and to secure the banks’ support of the plan” to expedite its application for bankruptcy protection. PAL said it signed the RSAs with 90 percent of its creditors and lessors as of the filing of its Chapter 11 case.
The RSA seeks to reduce PAL’s debt by $2 billion, cut its fleet by 25 percent, and facilitate the infusion of $505 million in new debt and equity from Tan plus $150 million from new investors.