Philippine Airlines files for pre-arranged Chapter 11 restructuring

Chicago, Sept. 3 – Philippine Airlines Inc. announced Friday evening that it reached agreement with various key stakeholders to restructure and reorganize its finances to navigate the Covid-19 crisis and emerge as a “leaner and better-capitalized airline,” according to a press release.

The agreements were reached with lenders, lessors and aircraft and engine suppliers, as well as its majority shareholder.

As part of the agreements, the company has voluntarily filed for a pre-arranged restructuring under Chapter 11 in the Southern District of New York. PAL will complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.

The restructuring plan, which is subject to court approval, will permanently reduce the balance sheet by $2 billion from existing creditors.

The company will consensually contract fleet capacity by 25% and includes $505 million in long-term equity and debt financing from the airline’s majority shareholder and $150 million of additional debt financing from new investors.

PAL will continue to operate flights in the normal course of business in accordance with safety regulations, and the company expects to continue to meet its current financial obligations throughout this process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.

Philippine Airlines Inc. is the only party included in the Chapter 11 filing; while PAL Holdings Inc., which is listed on the Philippine Stock Exchange (PSE: PHI), and Air Philippines Corp., known as PAL Express, are not included in the Chapter 11 filing.

Debevoise & Plimpton LLP, Norton Rose Fulbright US LLP and Angara Abello Concepcion Regala & Cruz (ACCRA) are acting as legal advisers and Seabury Securities LLC as financial advisor and investment banker to the company.

The issuer is the flag carrier of the Philippines and is based in Pasay City, the Philippines.

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