PAL exits Chapter 11 bankruptcy process, pushes recovery plan

NEW YORK/PASAY CITY – Philippine Airlines (PAL) entered the year 2022 on a high note after it exited from a voluntary debt reorganization process.

In a statement, PAL announced it has emerged from its voluntary Chapter 11 bankruptcy proceedings which allowed itto reorganize its debts while staying in operation.

In September last year, the flag carrier filed a voluntary petition for a prearrange restructuring under the US Chapter 11 process.
PAL said in September it had cancelled more than 80,000 flights, wiping out US$2 billion in revenue, and let go of more than 2,000 employees.

Under its arrangements with creditors, the flag carrier will secure some $505 million for its recovery plan upon its exit from the process — the first tranche will be a $250-million facility debt to be pared down in the next five years, and the second tranche worth $255 million will be converted into equity.

PAL said it emerged from the Chapter 11 proceedings “as a more efficient airline with a strengthened balance sheet, reaffirming its continuing role as the Philippines’ sole full-service airline with the largest international network.”
“PAL has streamlined operations with a reorganized fleet and is now better capitalized for future growth,” the airline added.

“Philippine Airlines has officially emerged from the Chapter 11 process with a streamlined fleet, a strengthened balance sheet, a US$2 billion reduction in debt and additional capital that enables us to invest in our operations,” the airline said in a statement.

“We are grateful to achieve this with the strong support of our creditors, the enduring commitment of our shareholders, the cooperation of our industry partners and government, and the collective efforts of the outstanding members of the PAL team around the world,” it added.

PAL’s court-supervised restructuring was completed in a shorter period than most typical Chapter 11 proceedings. “During this time, we continued to fly on our domestic and international routes, doing our best to stay focused on serving our loyal customers around the globe,” the airline said.

The airline said it successfully completed its financial restructuring within four months, in contrast to other airlines that remain in the Chapter 11 process more than a year after filing in 2020.

The flag carrier thanked its creditors and shareholders for the strong support as well as the cooperation of its industry partners and the collective efforts of PAL employees around the world who sustained flights on multiple international and domestic routes throughout the restructuring period.

PAL said it has streamlined operations with a reorganized fleet and is now better capitalized for future growth.

The company’s plan of reorganization, which was approved by the  U.S. Bankruptcy Court of the Southern District of New York  on December 17, 2021, provides for over $2.0 billion in permanent balance sheet reductions from existing creditors, improvements in PAL’s critical operational agreements and additional liquidity including a $505 million investment in long-term equity and debt financing from PAL’s majority shareholder.