DBP Eyed as Conduit or PAL Rescue Fund

The Philippine Star

Friday, December 18, 1998

By MARIANNE V. GO

The Department of Finance (DOF) is considering the Development Bank of the Philippines (DBP) as a possible conduit in seeking financial assistance for Philippine Airlines.

Specifically, the DOF is looking at the possibility of having the DBP borrow $150 million on top of the $300 million it has already asked from the Japan Export-Import Bank.

Coursing the financing needs of the ailing flag-carrier through the DBP or through a government-owned or controlled corporation such as the National Development Corp. (NDC) will be the "more likely choice," the DOF pointed out.

The additional loan that DBP will seek from the Jeximbank will be considered part of the financial assistance that the Philippines plans to seek under the $30-billion Miyazawa Fund.

Another option that the government is eyeing is using a GOCC such as NDC to borrow from the Jeximbank and then invest it in PAL in the form of preferred shares convertible to common shares when PAL is able to recover.

If PAL regains financial strength, the government could then privatize its holdings through a planned initial public offering.

But while government explores its options, the Jeximbank still has to officially receive the request of the Philippine government for assistance under the Miyazawa Fund.

Japanese government-related sources admitted that the Philippine government has to submit a priority list of projects that it is seeking financing for.

The Philippine government, sources said, presented a Japanese mission with a list of about 200 projects which the Japanese mission found too long.

It has thus asked the Philippine government to prune the list and submit a shorter list of priority projects.

As of yesterday, the Jeximbank had not yet received any official request from the DOF, sources said.

The Philippine government is hoping that it will be able to get a favorable response from the Japanese government before the Christmas holidays.

DBP president Remedios Macalingcag could not be reached as of press time on how the DBP would package the assistance needed by PAL, if and when the Jeximbank agrees to the loan.