GFIs Cool to Proposed PAL Bridge Financing

The Philippine Star

Wednesday, December 9, 1998

By MARIANNE V. GO

The Government Financial Institutions (GFIs) are lukewarm to a proposal for them to extend bridge financing to Philippine Airlines (PAL).

Philippine National Bank (PNB) President Benjamin Palma-Gil pointed out yesterday that PNB does not want to extend any additional loan to PAL as it already has several exposures to the airline in terms of equity and loans.

Palma-Gil said that aside from the P750-million equity infusion that PNB has made in PR Holdings Inc., PNB also extended loans to the airline for its aircraft acquisition.

Fortunately, for PNB, Palma-Gil said, it is one of the secured creditors of PAL and holds mortgage trust indenture (MTI) papers.

In fact, Palma-Gil said, PNB already wants to write off as a loss part of its investment in PAL already.

Development Bank of the Philippines (DBP) President Remedios Macalincag was likewise lukewarm to the proposal for DBP to extend bridge financing anew to PAL.

While Macalincag was non-committal, she stressed that DBP would prefer to focus on its thrust of providing financial assistance to small and medium enterprises rather than to big corporate or industrial borrowers.

Macalincag had previously said that the DBP does not want to increase its equity in PAL and would only like to be able to get back its P750-million equity investment through PR Holdings Inc. which owns 67 percent of PAL.

Land Bank of the Philippines (LBP) President Florido Casuela is already on record that LBP would prefer to just recover its own investment in PAL, but would listen to any offer about additional financing depending on the terms of the loan.

Finance Secretary Edgardo Espiritu had hinted at the possibility that the GFIs could provide some bridge financing for PAL as part of a worst case scenario. PAL, Espiritu said, may need the bridge financing if it is not able to speedily conclude negotiations for the entry of a strategic partner in the airline.

PAL has to make some lease payments to such institutions as the US Export-Import Bank for some of its aircraft leases.

The GFIs are hoping that Lucio Tan will be able to get some other investors, even not strategic partners, to be able to raise the additional funds needed by PAL rather than approaching the GFIs anew for additional funding. PAL is in the process of restructuring its debts with its creditors.