PAL Doesn't Have to Return Aircraft - SEC

The Manila Times

Friday, December 18, 1998

Carmina E. Reyes

The Securities and Exchange Commission (SEC) yesterday nullified the notice of termination of lease tendered by Pacer Aviation Ltd. and Credit Agricole Indosuez SA (CAI) against Philippine Airlines (PAL) ordering the return of an airplane leased to the flag carrier.

In an order dated Dec 16, 1998, the hearing panel led by SEC acting chair Fe Eloise Gloria said Pacer and CAI are “mandated to cease and desist from requiring PAL to deliver the leased property, or any leased properties by PAL in Hong Kong at any given period without order from the Commission.”

Last Dec. 16, the PAL interim rehabilitation receiver, led by chair Antonio Ocampo, filed a petition before the Commission seeking to nullify the notice of termination filed by Pacer and CAI which wanted Airbus A330-300 with serial number 191 delivered to Pacer in Hong Kong by 12 noon of Dec. 17.

The PAL receiver also asked that Pacer and CAI be directed to cease from issuing the termination order and that the two lessors file their comments on the flag carrier's rehabilitation plan by Dec 22.

“Considering that Pacer appeared and voluntarily submitted itself to the jurisdiction of the Commission by filing a complaint in intervention last Sept. 28, and finding that the described aircraft is currently used in PAL’s regional flights hereby grant the (receiver's) formal request,” the hearing panel said.

This is the first decision in favor of PAL since it submitted its financial rehabilitation plan to the SEC last Dec. 7.

The airline expects to get its creditors' comments of its proposed financial rehabilitation plan on Dec. 22. The program is anchored on a $150 million equity infusion to sustain its operations during its five-year rehabilitation period.

The Department of Finance (DOF) is eyeing government institutions including Land Bank of the Philippines and Nation Development Company to provide the $150 million from borrowings from foreign banks.

Finance secretary Edgardo B. Espiritu said either Land Bank or Development Bank of the Philippines may borrow from the Miyazawa fund and relend the proceeds to PAL.

Under the rehabilitation plan it submitted to the SEC for approval, PAL said it would need $150 million in fresh equity to make it viable again.

Of the amount, $90 million would come from local investors including the group of PAL chair Lucio Tan. The balance of $60 million should come from a strategic investor.