SBS Files P122-M Claim Against PAL

Manila Bulletin

Thursday, December 10, 1998

Security Bank Corporation has filed a P122.74 million ($3.07 million) claim against Philippine Airlines (PAL) representing its investment in the airlines Eurodollar bond issuance.

Based on the claim filed by the bank with the Securities and Exchange Commission (SEC), the amount represents $3 million worth of PAL bonds and accrued interest amounting to $68,458.33.

The bank said it has filed the claim as trustee-of the eurodollar bond. As trustee, SBC said it is filing the claim to protect, preserve and prevent the asset (bonds) from being dissipated.

It had refused to identify the principal of the corporate trust that holds the PAL bonds given the confidential nature of the agreement but promised to produce a copy of the agreement in the hearing of the claim.

PAL is projecting to start paying interest on its debts next fiscal year (1999-2000) when it expects to post a net profit of $35.2 million from revenues of $669.9 million. On a best case scenario, net interest payment would amount to $97 million.

According to the airline's base case projections, passenger loan factor is seen to grow from 67.6 percent in 1999 to 73.4 percent by the end of fiscal year 2006. By then, profits will reach $193.5 million from revenues of 69436 Million.

Based on the downside case projections, loan factor is seen to grow up to 71.8 percent by 2006. Revenues will grow from $633.5 million in 1999 to $809.8 million while the airline is seen to post a net loss of $4.3 million in 1999 before recovering the following year and eventually post profits of $69.3 million in 2006.

PAL's rehabilitation plan calls for a P6 billion ($150 million) capital injection from its shareholders, a reduction in capital and the restructuring of its obligations to various types of creditors.

The capital restructuring will be done by reducing the par value of its shares from P5.00 per share to one centavo apiece. After this, the P6 billion shareholder equity injection will comprise over 90 percent of the new equity ownership of the company. (JAL)