Philippine Airlines gets OK of first-day motions, interim DIP access

By Sarah Lizee

Olympia, Wash., Sept. 10 – Philippine Airlines Inc. received approval from the U.S. Bankruptcy Court for the Southern District of New York of all of its first-day motions, according to a press release issued Friday.

This includes access to the first $20 million of its proposed $505 million in debtor-in-possession financing provided by some of its direct and indirect equity holders.

The company also received approval to honor and maintain its customer programs, to pay ongoing suppliers and trade creditors, and to continue to pay employees.

“These approvals mark an important step forward in PAL’s recovery plan, which will reduce the company’s debt by $2 billion and help the company recover from the impact of the global pandemic,” the company said.

DIP facility details

As previously reported, 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 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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