PAL Weighs Rehab Options

Philippine Daily Inquirer

Friday, December 4, 1998

Finance secretary Eduardo Espiritu yesterday said the management of cash-strapped Philippine Airline had an alternative rehabilitation plan to submit by Dec. 7 despite the collapse of buy-in talks with potential strategic investors Cathay Pacific Airways and Northwest Airlines.

Espiritu told reporters the Lucio Tan-led management was negotiating with other potential investors but would still push through with a rehab plan should these talks bog down.

“They will submit a rehab with or without Cathay,” Espiritu said.

The finance chief  said the group of the tobacco magnate Lucio tan, which controls 70 percent of the beleaguered airline, was negotiating with other prospective investors.

“We cannot disclose them because they are the ones negotiating. But some of them are not airline groups, “he said. He said there were  a lot of other options available.

“But the government’s preference is strategic…somebody who has expertise, “he stressed.

But he said Malacañang would not interfere in PAL’s bailout and that it would be up  to the current management to draw up the alternatives.

If no new strategic partner comes in, Espiritu said the rehab plan would still be pursued but there would be no more transfer of management control. Instead, he said there would be “management-sharing” between Tan and the other new shareholders.

The tan group has estimated that the flag carrier would need P6 billion to enable it to recover its foothold.

It was reported on Thursday that both Cathay and Northwest had already pulled out of buy-in talks with PAL.

Espiritu earlier said the International Finance Corp., the investment arm of the World Bank, was willing to invest in PAL if there would be a strategic partner which would come and efficiently implement its restructuring program.

Should any deal push through, the new foreign partner, along with IFC, will take up 40 percent of PAL while Tan group’s control will be reduced to 30 percent.