Creditors Give Varying Views on PAL Rehab

Malaya

Wednesday, December 23, 1998

The Philippine Commercial International Bank (PCI Bank), one of the creditors of Philippine Airlines (PAL), okayed the downsizing of the airline's fleet and the sale of some of its aircraft to partially settle PAL's domestic syndicated loan.

In a document submitted to the Securities and Exchange Commission in connection with the rehabilitation plan of PAL, PCI Bank said proposed that rotables and airbus engines should be sold and the proceeds be applied for partial payment of the $60 million domestic syndicated loan facility.

"After all, this suggestion is similar to what petitioner (PAL) did with respect to another syndicate secured by airbus planes, which when sold, the proceeds of the sale were applied to the syndicated loan," PCl Bank said.

But another creditor, the European Export Credit Agencies (ECAs), through French bank Credit Agricole lndosuez, in a separate document said they have rejected the draft rehabilitation plan of PAL.

Under the rehab plan submitted by PAL, it recommends a downsizing of its fleet from 52 to 22 aircraft.

Philippine National Bank (PNB), on the other hand, opposed the reduction in par value of existing common shares of PAL from P5 per share to P0.01 per share.

"We believe this valuation is too low and will substantially dilute our interest in the company," PNB told the SEC. PNB is seeking a clarification on how the Interim Rehabilitation Receiver (IRR) arrived at the P0.01 valuation of the share.

PNB also told the SEC that IRR has classified its short-term loan for 566 million as partially secured. However, the bank said, their record shows that said loan is fully secured by REM on land and building of PAL located in Makati and mortgage participation certificates issued in PNB's favor on the mortgage trust indenture of Asia Brewery.