Mabuhay Miles, older aircraft: PAL details guarantees to secure crucial financing

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Billionaire Lucio Tan’s Philippine Airlines (PAL) is pledging 15 planes, spare engines and frequent flyer miles as collateral to secure additional loans as part of an ongoing restructuring process.

Following Chapter 11 Creditor Protection Plea in the United States to Write Off $ 2.1 Billion in Debt, PAL Seeks to Raise $ 505 Million in Debtor-In-Owner Financing (DIP) .

The loans will be guaranteed by Tan, majority shareholder of PAL since 1993.

Based on the loan conditions sheet submitted by PAL’s attorneys to the Chapter 11 court, the DIP facility would be guaranteed by eight Airbus A320-200 “mid-life” and seven DHC 8-300 / 400 “mid-life” aircraft. of life ”and their engines.

The loans would also be secured by five engines, including those manufactured by the US company GE Aviation and the British multinational Rolls Royce Holdings used in PAL’s large jet fleet.

DIP installation

The carrier’s Mabuhay Miles loyalty program contracts have also been pledged as collateral, according to the list of conditions. The US court had previously granted PAL access to the first $ 20 million of the $ 505 million DIP facility, a special type of fundraising for companies undergoing this type of restructuring.

The proposed lender for the DIP loans was Tan’s Buona Sorte Holdings Inc.

The proceeds from the DIP would be used to refinance the bridging loans that had previously been granted by Tan as well as for working capital and other expenses related to Chapter 11 advocacy.

Prior to the Chapter 11 filing, Tan provided interim financing to PAL with a combined value of $ 100 million, which PAL lawyers said helped the national carrier continue operations and “avoid a free fall. destructive of value in bankruptcy ”.

The DIP facility would be divided into two tranches of $ 250 million and $ 255 million with an interest rate of 9.5% per annum, according to the term sheet.

$ 125 million exit loan

PAL is also seeking an optional $ 125 million exit loan, with an interest rate of 10.5%, to support operations after exiting the Chapter 11 process.

PAL’s restructuring advisor, Seabury International Corporate Finance LLC, explained earlier that they could not find more favorable terms after meeting 115 potential lenders over a period of six to eight weeks.

Seabury chief executive Douglas Walker said neither party “was prepared to provide such financing on equivalent or more favorable terms”.

“Some were unresponsive or unwilling to invest capital in an airline during a global pandemic, others would have demanded less favorable economic conditions from the debtor, and none were willing to offer the debtor a conversion option. in the proposed mix of equity and long-term unsecured debt, ”he said. INQ

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