Gov’t to use NDC to bail out PAL

Malaya
Thursday, December 17, 1998
Pearl O. Bantillo

The government will use the National Development Corp. in helping Philippine Airlines get some sort of bridge financing from the Miyazawa Fund.

Finance Secretary Edgardo Espiritu told reporters yesterday the NDC, the national government's lead investment company, can borrow from the Miyazawa Fund, relend it to PAL in exchange for preferred shares.

The shares are convertible into common shares and can also be redeemed at a given period.

“NDC could be given a credit enhancement or guarantee when it borrows from the international capital market," Espiritu said.

The government is not allowed to borrow directly from the $30-billion Miyazawa facility and could not tap the credit enhancing or guarantee under the Japanese initiative.

“The government is willing to help in saving PAL. We want NDC to get the preferred shares precisely because the government doesn't want to come in," Espiritu said.

Another plan being considered is the use of Land Bank of the Philippines and the Development Bank of the Philippines as the conduits for the loan to PAL.

Espiritu said there are many options on how the government, along with the various creditors, could keep PAL a viable business until a strategic investor comes in.

“All of these, however, hinge on the approval of the proposed rehabilitation plan by the creditors, the Securities and Exchange Commission, and professional managers,” he said.

Finance undersecretary Lily Gruba, in charge of the corporate affairs sector, said the management control of the airline could be bequeathed to “a group of professional exports” if the creditors insist on asking Lucio Tan to give up management.

“On a stand-alone basis it is necessary that PAL be highly-professionally managed. We will listen to the creditors,” said PAL chief operating officer Jaime Bautista as he emerged from meeting at the Department of Finance.

Espiritu, on the other hand, noted that the creditor banks themselves could form the required management group.

PAL has submitted a rehabilitation plan to the SEC to restructure its $2.28 billion debt to domestic and foreign creditors.

PAL needs $150 million fresh capital to operate smoothly and viably.

Upon approval of the plan, the group of Lucio Tan and existing shareholders of PAL will have to infuse $90 million while the balance of $60 million would be paid 180 days after the first tranche of capital injection has been made.@