Creditors of PAL Seek Extension

The Manila Times

Tuesday, December 29, 1998

By CARMINA E. REYES

SEVERAL creditors of Philippine Airlines (PAL) have asked the Securities and Exchange Commission (SEC) for more time to submit their comments on the proposed rehabilitation plan for the beleaguered airline.

A syndicate of local banks composed of Allied Banking Corp., Banco de Oro, China Banking Corp., Equitable Banking Corp., International Exchange Bank, Philippine National Bank, RCBC, Security Bank, Unionbank, and Westmont Bank, sought an extension until Jan. 24, 1999 to submit their comments.

The Sycip Salazar Hernandez & Gatmaitan law office which represents Pratt and Whitney Canada Inc., Pratt and Whitney Canada (SEA) Pte. Ltd. of Singapore, and the syndicate of creditor banks under the $182 million loan and security arrangement likewise sued for more time to file their comment.

"Due to the large volume of information in the rehabilitation plan which need to be carefully studied by the syndicate of creditor banks in order for it to submit its comment, the group is seeking a 30-day extension," the law office said.

General Electric Capital Corp. and Mobil Philippines Inc., which are represented by Poblador Bautista & Reyes law office, also want the deadline extended until Jan. 24.

The SEC earlier gave creditors until Dec. 22, 1998 to file their comments on PAL's rehabilitation plan, or 15 days after the airlines company submitted the plan on Dec. 7.

Some of PAL's European creditors have already rejected the proposed rehabilitation plan.

According to the creditors, the capital infusion and the entry of a strategic partner are crucial elements that were not included in the rehab plan.

The rehab plan and the comments of PAL's creditors will be used by the SEC as basis in its decision whether to rehabilitate or liquidate the airline.

Under the rehab plan submitted by PAL to the SEC last Dec. 7, its creditors will be required to reschedule payments of its $2.2 billion debts, investors will have to infuse $150 million in fresh capital, and its fleet downsized to reverse its losses and stay competitive.

Meanwhile, the Airlines Pilots Association of the Philippines (Alpap) said the proposed rehabilitation plan is "full of flaws."

In a five-page comment submitted to the SEC's securities investigation and clearing division (SICD). Alpap said the plan depended on the pre-requisite of securing a strategic partner in the form of a foreign airline.

“The plan goes about its projection as if the flag carriers' woes were simply the unwanted consequences of vain attempts to contain an unwieldy corporate behemoth and not something more fundamental," the associations said.

Alpap was represented by Josabeth Alonso Antonio of the Alonso-Antonio & Partners.

According to Alpap, the rehab plan was understood to be for securing not only financial aid but also competent managers for PAL.

"Undeniably, one of the major flaws of the existing system of management, is the incompetence of its present managers...can we expect a rehabilitation plan to sincerely rectify such flaw when the proponents of the plan are themselves the flaw," Alpap stressed.

The group also criticized the interim rehabilitation receiver, saying the plan has no clear program for its employees.

“The plan is either deliberately silent or has really no clear program at all for its employees. This is quite odd for a rehabilitation plan because the workforce is a major party in any rehabilitation to be possible," Alpap said.

Aside from these, Alpap said the rehabilitation plan was full of "protectionist" measures which betrays the fact that the company can compete with other domestic airlines.