Philippine Airlines seeks approval of $505 million DIP financing

By Sarah Lizee

Olympia, Wash., Sept. 7 – Philippine Airlines Inc. is seeking court approval to obtain $505 million in debtor-in-possession financing provided by some of its direct and indirect equity holders, according to a motion filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

The facility consists of a $250 million first-lien secured tranche A multi-draw term loan facility, $20 million of which will be available in a single draw following an interim order, and a $255 million second-lien tranche B multi-draw term loan facility.

The facility is set to mature 63 months form the petition date. Loans will bear interest at 9˝%. There is a 1% upfront fee.

Buona Sorte Holdings, Inc. is the lender for the tranche A term loan, and PAL Holdings Inc. is the lender for the tranche B term loan.

The initial tranche A DIP lender directly owns about 60% of the equity of non-debtor Trustmark Holdings Corp., which in turn directly owns about 76.9% of the equity of the initial tranche B DIP lender, which directly owns about 98.57% of the equity of the debtor.

The initial tranche A DIP lender provided secured term loans under bridge loan facilities to the debtor in the months prior to the petition date.

In exchange for the additional liquidity afforded by the DIP facility and the agreement of the initial tranche A DIP lender to accept repayment of its DIP loans in long-term unsecured exit financing instead of cash in connection with an acceptable plan, the debtor has agreed to repay and refinance all $100 million in principal of the pre-petition loans and accrued interest and fees.

At the debtor’s option, the tranche A DIP loans are convertible into unsecured exit financing, and the tranche B DIP loans are convertible into equity in the reorganized debtor.

“The conversion features preserve the debtor’s liquidity options, lower the barriers to exiting Chapter 11, and were key components in reaching agreement among those stakeholders that signed onto the restructuring support agreements and agreed to receive distributions of common equity in the reorganized debtors in exchange for certain of their pre-petition claims,” the company said in its motion.

The issuer is the flag carrier of the Philippines and is based in Pasay City, the Philippines. The company filed bankruptcy on Sept. 3 under Chapter 11 case number 21-11569.

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