Cathay Resumes PAL Talks

Malaya

Wednesday, December 9, 1998

By REGINA BENGCO

Negotiations are still on with Hong Kong-based Cathay Pacific for a strategic partnership with Philippine Airlines and results of the talks will be known in three days, Finance Secretary Edgardo Espiritu said yesterday.

Espiritu, in a radio interview, said Cathay's remaining concern is the constitutional provision limiting foreign ownership in public utilities to 40 percent.

He said Cathay is seeking management control and is worried a 40 percent stake is not enough to insure that.

Espiritu said President Estrada is in constant contact with Cathay officials.

"(Ang) masasabi ko ay nabuhav na naman ang discussions. Siguro sa dalawa o tatlong araw e malalaman na natin kung tuloy o hindi ang Cathay," he said.

He said Cathay is now amenable to the retention of PAL's existing 8,500 workforce.

Espiritu said PAL’s stockholders are willing to give Cathay a free hand in day-to-day management.

PAL's interim rehabilitation committee the other day submitted a program that calls for a new capital infusion of $150 million, a reduction in the par value of outstanding shares from P5 to P0.01, extension of the maturities of debts and the writing down of part of unsecured loans.

The rehabilitation plan calls for a reduction in the fleet from 53 to 22 aircraft and the abandonment of unprofitable routes.

Lucio Tan has offered to immediately infuse $90 million, with the potential strategic partner to put in $60 million in six months.

Espiritu said if negotiations succeed, Cathay plans an immediate takeover but will infuse its share next year. He said Cathay expects approval of the rehabilitation plan by February or March.

He said government financial institutions will provide bridge financing to keep PAL flying while the rehabilitation program is under discussion with creditors.

Espiritu also said Singapore Airlines is also interested but talks are still in the preliminary stage.