The global aviation sector has taken a beating as international travel ground to a halt due to Covid-19, and Philippine Airlines is no exception.
Flag carrier Philippine Airlines (PAL) can now proceed with its bankruptcy exit plan now that US Bankruptcy Judge Shelley Chapman approved last Friday (December 17) its reorganization plan.
Bloomberg reported that PAL won court approval for its reorganization plan, paving the way for the carrier to exit bankruptcy, cut $2 billion in debt and revive its fortunes after a slump in international travel.
Judge Chapman said Friday she would approve the Chapter 11 plan after unsecured creditors voted to back the proposal.
The reorganization didn’t face any major opposition from debt holders, Bloomberg added.
“This case is a model for what can be accomplished in Chapter 11,” Chapman said. “You’ve achieved overwhelming consensus.”
Before end of 2021
The company expects to emerge from the court-supervised Chapter 11 process before the end of 2021 and after completing “a few more procedural steps,” PAL’s statement last Saturday said.
The global aviation sector has taken a beating as international travel ground to a halt due to Covid-19. The emergence of the Omicron variant has triggered new border restrictions and business closures, clouding the outlook for recovery.
The flagship carrier, majority owned by billionaire Lucio Tan, is one of several airlines to enter debt restructuring in the US, which companies often consider a preferred location.
Aeromexico and Colombia’s Avianca Holdings sought court protection in New York last year.
Access to $505M financing
Philippine Airlines had already gotten a green light to access $505 million worth of equity and debt financing to help it meet obligations. The company on Saturday also said the plan provides for more than $2 billion in permanent balance sheet reductions from existing creditors and allows the carrier to consensually contract fleet capacity by 25 percent.
The outcome of its New York proceedings could set a precedent for carrier PT Garuda Indonesia, which was ordered by judges in Jakarta to embark on a court-supervised debt restructuring process.
The “court approval represents a critical moment in our journey to emerge as a stronger airline,” Philippine Airlines President Gilbert Santa Maria said. The company flies to 32 international and 29 domestic destinations from its three hubs in the Southeast Asian nation.
Tags: #airtravel, #PhilippineAirlines, #business, #restructuring, #Covid19