he Manila Times
Saturday, September 19, 1998
By Jun Ezias and Zinnia de la Peña
THE management of Philippine Airlines (PAL) is now drafting the guidelines for the eventual liquidation of the airline's assets and the settlement of its obligations to creditors and suppliers, including the prioritization of claims against the firm, PAL's Senior Vice President Manolo Aquino said yesterday.
“We are now preparing for the closure," Aquino said. "We are drafting the guidelines on how to handle our passengers. We are also working on the liquidation of the assets and who will be given the priority in the payment of claims."
The employees of PAL, he said, will have the first crack in the payment of claims. Next, he said would be the secured creditors, then unsecured creditors, preferred shareholders, and lastly, the common stockholder.
Aquino said the airline estimates it will cost the company P2 billion to pay all benefits due to its employees.
PAL owes about $2 billion to a group of local and foreign banks led by the Philippine National Bank and Chase Manhattan Bank N.A. Aquino, however, said they have yet to hear from them.
He said the firm will also refund all the airline tickets issued by the company that the passenger could no longer use since PAL will cease operation by Sept. 23. All ticket holders will be paid in cash.
Finance Secretary Edgardo Espiritu said that once PAL is closed, he said the loan restructuring and rehabilitation plan that the firm would submit to the Securities and Exchange Commission (SEC) by Sept. 21 will no longer by useful.
PAL earlier secured a moratorium on debt payments while a survival plan was being considered by regulators and creditors.
"Wala na (it's useless). Liquidation na, eh," Espiritu said."We just advised them (banks) with the development," he said. PAL management and its creditor banks, he said would meet to discuss the payment scheme.
Aquino also said PAL Chairman Lucio Tan has no plans to form a new airline after PAL shuts down by midnight on Sept. 23.
When asked if Tan was bowing out of the airline industry, Aquino told Reuters in a phone interview, "'that's what he has declared."
"I am not aware of any plans regarding that (forming a new airline) and I think it would be really bad faith on the part of the Tan group to set up a new company."
Meanwhile, PAL's interim management committee formally informed the SEC yesterday about PAL's impending closure.
But SEC spokesperson Ysobel Yasay-Murillo said uncertainties still hover around PAL's real intentions, because the interim committee did not say whether PAL will voluntarily seek its own liquidation.
PAL earlier filed a petition with the SEC, seeking a suspension of its $2-billion debts to creditors.
Under SEC rules, PAL has to withdraw its petition for debt relief and plead for the liquidation of the company's assets, if its decision to close shop is irrevocable.
The uncertainties, however, may be threshed out Monday when the SEC holds another hearing on PAL.
Yasay-Murillo said the SEC will put on hold any action on the PAL petition, while the government tries to broker a last-minute deal to keep PAL in business.
As this developed, two smaller airlines were grounded yesterday in another severe blow to the country's airline industry.
Regulators suspended the operating certificate for Air Philippines, the country's second-largest airline, for failure to comply with safety standards. Grand International Airways, a smaller carrier, canceled its flights because of unpaid insurance and fuel bills, employees said. —With Reuters, AP
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