CHASE, LEK To Draw Up PAL Rehabilitation Plan

Philippine Daily Inquirer
September 2, 1998
Business
By Tina Arceo-Dumlao

CASH-STRAPPED Philippine Airlines Inc. has appointed New York-based Chase Manhattan  Bank and European airline industry expert LEK to draw up its complex rehabilitation plan.

PAL counsel Estelito Mendoza said yesterday Chase Manhattan was chosen to draw up the financial rehabilitation plan for the flag carrier while LEK would look into “operational improvements.”

Chase Manhattan and LEK were chosen through competitive bidding by the PAL interim receivership committee appointed by the Securities and Exchange Commission.

The interim receivership committee is chaired by PAL’s former chair and chief executive, Roman Cruz Jr.

It is scheduled to submit a rehabilitation plan to the SEC by Sept. 21.

The first meeting between the commission’s hearing panel, PAL creditors and airline officials would be held after the submission of this plan.

PAL filed a petition for the appointment of a rehabilitation receiver last June after falling under its P85-billion debt burden.

The airline’s debts piled up due to an ill-timed expansion program and Asia’s currency crisis.

PAL was forced to seek debt relief as it anticipated the impossibility of paying its obligations and liabilities as these fell due.

It is the biggest local company so far to file for debt suspension with the SEC.

“Losses which the petitioner has been suffering have been aggravated by the economic crisis presently being suffered by the Philippines and a number of other Asian countries, low passenger traffic and labor disputes,” PAL said in its petition.

PAL said these factors prevented it from posting earnings and led to P85.109 billion.  Over P46 billion of these debts were in the form of capital leases on its aircraft fleet.

PAL has also filed bankruptcy petitions in American courts to prevent its foreign creditors from seizing its assets.