SEC Junks Lease Termination Contracts on PAL Aircraft

Malaya

Friday, December 18, 1998

Vic S. Lopez

The Securities and Exchange Commission (SEC) will not allow the termination of existing lease agreements with any of the airplanes currently being used by cash-strapped Philippine Airlines (PAL).

The SEC three-member hearing panel for the rehabilitation of PAL issued an order yesterday setting aside with no effect the notice of termination and lease over Airbus A300-300 given by Pacer Aviation Limited and Credit Agricola Indosuez S.A. The notice was given to the SEC last Dec. 15 and asked PAL to deliver the aircraft before noon yesterday in Hong Kong.

The SEC also said that the subject aircraft is currently being used in PAL’s regional operations and is vital to the company for its rehabilitation.

"In order not to duly hamper and render ineffectual whatever orders that may be issued in the case at bar or in adjudication of the merits of the petition or rehabilitation plan submitted, we hereby grant the Interim Rehabilitation Receiver’s (IRR) formal request," the hearing panel said.

PAL's IRR member had asked the SEC not to grant the termination agreement.

The SEC did not only throw the notice but even ordered the company "to cease and desist from requiring PAL to deliver the leased property or any of the leased properties of PAL in Hong Kong at any given period without prior orders from this Commission."

The order was based on the fact that Pacer has appeared and voluntarily submitted to the jurisdiction of the Commission by filling the petition for the cancellation of the lease agreement last Sept. 28, 1998.

The SEC panel also ordered the lessor firms to comment on the submitted rehabilitation plan of PAL.

The hearing panel has convened a task force from within the SEC to study and analyze PAL’s rehabilitation plan.

The task force will submit to the hearing panel their recommendation within 30 days from the date of the order of the commission (Dec. 7). In its rehabilitation plan, PAL said that it can go it alone without a foreign strategic partner.

The SEC also directed IRR to furnish a copy of the rehabilitation plan to its creditors. PAL creditors were given 15 days to file their comments on the rehabilitation plan.