Wednesday, December 23, 1998

PCI BAnk Questions PAL Rehab Plan

Business World
Wednesday, December 23, 1998
Maricris C. Carlos and Reena J. Villamor

Philippine Commercial International Bank (PCIBank) has reservations about the debt restructuring component of the rehabilitation plan of the ailing Philippine Airlines (PAL).

In a motion filed with the Securities and Exchange Commission (SEC), PCIBank said fully and partially secured loans should be allowed to mature in 10 years inclusive of the grace and repayment periods, instead of the 15 years PAL is proposing.

At the same time, PCIBank also opposed PAL’s proposal to waive interest payments on all “post-petition” loans, including default interest.

“The suggestion is open-ended, hence, would be too onerous for acceptance,” it said.

Since the “post-petition” period started on June 23, this should end on Dec. 31, at the latest, PCIBank said. After Dec. 31, “interest should begin to accrue.”

The bank also pressed PAL to sell some assets, in particular its aircraft engines, and to use proceeds “for partial payment of the $60-million domestic syndicated loan facility” extended by local banks.

PCIBank also raised some concern on the membership of the permanent rehabilitation receiver which will take over from the existing interim rehabilitation receiver in overseeing PAL’s rehabilitation.

For one, PCIBank wants to know whether the body would be comprised of a single receiver or by a collegial body comprised of a chairman and members.

PCIBank was among the first to comment on the rehabilitation plan PAL submitted to the SEC last Dec. 7. The plan provides for a $150-million equity infusion and a comprehensive debt restructuring program seen to affect all PAL’s 9,000 creditors.

Deadline for the creditors to comment on the plan lapsed yesterday.

Meanwhile, PAL sought more time to answer the motion of leasing firms General Electric Corp. of the United States, and Ireland’s GPA Group Plc., and Airplanes Finance Ltd. demanding the return of three leased Boeing aircraft. The three wants PAL to deliver the planes to Ireland.

PAL Counsel Estelito Mendoza said he needs more time to answer the motion of the three firms “due to heavy workload…which normally increases prior to Christmas holidays.” He asked for a 10-day extension or until Dec. 31.

SEC has scheduled a conference hearing today on certain provisions of the rehabilitation plan.

Meanwhile, as a “distinct and separate” entity, some members of the PAL pilots’ retirement board said the airline has no authority to direct the retirement fund’s trustees banks to withhold benefit payments to pilots who have retired this year.

PAL is enjoining two of the three trustee banks to hold on to the fund until the two cases are resolved.

The board, composed of two PAL-designated members and seven members of the Airline Pilots Association of the Philippines (ALPAP), was formed to administer and manage the PAL Pilots Retirement Benefit Plan, an offshoot of collective bargaining agreement between PAL and ALPAP in the early 1970s.

“Under the retirement plan, the PAL pilots retirement board has complete and absolute authority to administer and manage the plan,” ALPAP and Retirement Board President Sotico T. Lloren said.

The three trustees banks – Bank of the Philippine Islands (BPI), PCIBank and Metropolitan Bank & Trust Co. – hold about P2.2 billion. BPI has the bulk with P1.8 billion, most of which are unliquidated real estate assets, ALPAP said.

PCIBank and Metrobank both hold P200 million in liquid funds. “Upon instruction from the retirement board, these trustees are duty-bound to make the necessary payments…as the board may dictate without any conditions whatsoever,” Mr. Lloren said.

ALPAP said the funds belong to the board. “When PAL gave the money to the board, they let go of it.”

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