Business World
Wednesday, December 2, 1998
By Manolo A. Serapio
Reporter
The International Finance Corp. (IFC), the private investment arm of the World Bank will proceed with plans to invest in Philippine Airlines, Inc. (PAL) even if Hong Kong-based Cathay Pacific Airways Ltd. decides to jump ship, Finance Secretary Edgardo Espiritu said yesterday. "IFC is willing to invest whoever is the partner as long as there is a viable restructuring proposal," he said.
Mr. Espiritu said IFC is ready to invest 20% to 30% of whatever equity investment the strategic partner will pour in. So far, he said PAL needs $150 million in fresh capital. This amount will have to be "shared" by the new investor and existing shareholders led by PAL Chairman Lucio Tan. "IFC can invest 20% to30%of the $75 million off the new partner," he said. Mr. Espiritu said negotiations between Cathay and existing shareholders of PAL are continuing and a deal for the possible takeover of the foreign airline of the national carrier can still be finalized within the year.
"There are some sensitive labor issues that are still being discussed. We hope there will be an agreement before yearend," Mr. Espiritu said. At the crux of the issue is Cathay's plan to trim down PAL's work force to 5,000 from the current 8,500, a plan which does not sit well with the flag carrier's labor.
President Estrada and Mr. Tan have committed not to engage in massive layoffs during the ensuing 10-year rehabilitation program for the airline.
But Cathay officials said cutting the labor force is part of its major plans to turn around the cash-strapped PAL prompting Mr. Tan to woo other potential partners including US-based Northwest Airlines.
Cathay is positioning to gain 40% of PAL, enough to take management control of the company. Mr. Tan's shares which currently cover 70% of the total shareholdings will be reduced to 30% with the employees owning 20% and existing government and private shareholders diluted to 10%.
Thursday, December 3, 1998
World Bank Arm Remains Keep on Investing in PAL
Philippine Daily Inquirer
Wednesday, December 2, 1998
BUSINESS
FINANCE Secretary Edgardo Espiritu yesterday said the International Finance Corp., the investment arm of the World Bank, would still invest in Philippine Airlines whether it was Cathay Pacific Airways or Northwest Airlines which would come out as its strategic partner.
"They (IFC) are willing to put up 20 to 30 percent of the 40 percent (PAL) stake to be given to a strategic partner," Espiritu said.
"What is important for IFC is that there is a strategic partner which will come in and efficiently implement PAL's restructuring program." he said.
IFC is willing to put up 20 percent of the $100-million commitment given by the Hong Kong-based airline.
The Lucio Tan-led management has estimated that PAL would need $150 million to kick start a rehabilitation program.
This developed amid reports that PAL had already reopened negotiations with Minnesota-based Northwest Airlines following some disagreement with Cathay over retrenchment plans for the national flag carrier.
Cathay was a shoo-in to take over management control of PAL until the labor issue came out. The emerging deal was delayed by disagreement on how many airline employees would be laid off when Cathay takes over.
But Espiritu said Cathay and PAL still had until Dec. 7 to flesh out a viable rehabilitation plan for the distressed airline.
The finance chief said he believed that IFC's entry into PAL with any foreign strategic partner would strengthen the confidence level in the flag carrier, which almost folded up under the weight of labor problems and $2 billion worth of debts.
Northwest was the first airline to express interest in buying out 40 percent of PAL last year prior to the pilots' strike. The US-based airline was turned off, however, by the labor disputes in PAL.
Should any deal push through, the new foreign partner, along with IFC, will take up 40 percent of PAL while the Lucio Tan group's control will be reduced to 30 percent at the most even if it will match the $100-million fresh equity infusion by the new investors.
On the other hand, 20 percent of PAL, as promised by Tan, will be turned over to the employees under a stock offering plan while the remaining 10 percent will be left to the diluted minority shareholders, including the government financial institutions
Wednesday, December 2, 1998
BUSINESS
FINANCE Secretary Edgardo Espiritu yesterday said the International Finance Corp., the investment arm of the World Bank, would still invest in Philippine Airlines whether it was Cathay Pacific Airways or Northwest Airlines which would come out as its strategic partner.
"They (IFC) are willing to put up 20 to 30 percent of the 40 percent (PAL) stake to be given to a strategic partner," Espiritu said.
"What is important for IFC is that there is a strategic partner which will come in and efficiently implement PAL's restructuring program." he said.
IFC is willing to put up 20 percent of the $100-million commitment given by the Hong Kong-based airline.
The Lucio Tan-led management has estimated that PAL would need $150 million to kick start a rehabilitation program.
This developed amid reports that PAL had already reopened negotiations with Minnesota-based Northwest Airlines following some disagreement with Cathay over retrenchment plans for the national flag carrier.
Cathay was a shoo-in to take over management control of PAL until the labor issue came out. The emerging deal was delayed by disagreement on how many airline employees would be laid off when Cathay takes over.
But Espiritu said Cathay and PAL still had until Dec. 7 to flesh out a viable rehabilitation plan for the distressed airline.
The finance chief said he believed that IFC's entry into PAL with any foreign strategic partner would strengthen the confidence level in the flag carrier, which almost folded up under the weight of labor problems and $2 billion worth of debts.
Northwest was the first airline to express interest in buying out 40 percent of PAL last year prior to the pilots' strike. The US-based airline was turned off, however, by the labor disputes in PAL.
Should any deal push through, the new foreign partner, along with IFC, will take up 40 percent of PAL while the Lucio Tan group's control will be reduced to 30 percent at the most even if it will match the $100-million fresh equity infusion by the new investors.
On the other hand, 20 percent of PAL, as promised by Tan, will be turned over to the employees under a stock offering plan while the remaining 10 percent will be left to the diluted minority shareholders, including the government financial institutions
World Bank Hinges PAL Stake on Strategic Partner
The Business Dailly
Wednesday, December 2, 1998
By ARVIN P. PANES AND MARIE A. SURBANO
The International Finance Corporation (IFC) — the World Bank's financial arm — is willing to put as much as $22.5 million into Philippine Airlines (PAL) on the condition that it will have a ''strategic investment partner" in the carrier.
Finance Secretary Edgardo B. Espiritu told reporters a partner who would be expected to cover the remaining amount of the entire $150 million (P6 billion) needed to revive PAL could either be foreign or local.
"IFC wants a restructuring program for the airline. It wants the expertise of a strategic partner," Espiritu said.
"IFC wants to put in as much as 20% ($15 million) to 30% ($22.5 million)," he affirmed.
Notwithstanding IFC's intention to infuse money into the distressed airline, Cathay Pacific Airways Ltd. remains committed to its negotiations aimed at acquiring a stake in PAL, Espiritu said.
The Swire-owned Hongkong firm continues to be unfazed by Lucio Tan's talks with Northwest Airlines seeking an arrangement wherein the carrier would assume a manager's role in PAL, Espiritu said.
The finance chief indicated agreement with Tan's objective regarding Northwest.
Tan is the majority owner of PAL.
Last Chance for Filipino PAL?
Espiritu further confirmed that government had denied Tan's petition for financial assistance for his hemorrhaging airline due to issues involving ownership.
Reportedly, Tan was asking the national government for funding amounting to anywhere between P6 billion and P9 billion.
Sources privy to the ongoing PAL-Cathay dialog have disclosed that the measure had been the last option government and Tan could explore if they wanted to resuscitate PAL without control of the airline effectively passing into foreign hands.
"Government should do this if it really wants to help PAL," the source stressed.
When queried on the matter, Espiritu responded, "it is not right for government to do so because PAL is already a private firm."
He also pointed to the fact that the coffers of the national government were lacking content, as evidenced by the widening budgetary gap seen to hit P40 billion by the close of the year and P68.4 billion by 1999.
Espiritu noted that the feasibility of Cathay's offer for a buy-in would be determined by the Securities and Exchange Commission on Dec. 7, the date by which Cathay is expected to have submitted the results of its due diligence study of PAL to the SEC.
Protecting Interests
While politely declining to come up with the cash, a government representative yesterday declared official willingness to help Tan find an investor to help save the debt-ridden PAL after the latter had recently put the breaks on the deal with Cathay Pacific.
In an interview, Executive Secretary Ronaldo Zamora said government still holds a sizable stake in PAL which it needs to protect.
"Remember it is not Lucio Tan alone who is involved in PAL. We also have billions of pesos to protect," Zamora stressed.
According to Zamora, the government stake in PAL represents 28% of the carrier. Throwing a monkey wrench into PAL's efforts to find a new investor would in the process put the national flag carrier into a far more unsetting situation.
We hold 28% of PAL. The question is how do you get PAL to go beyond what it is doing and get it to operate profitably," he pointed out.
Zamora admitted to government being unaware of recent developments in the negotiations between Tan and Northwest Airlines.
"These things can change overnight," Zamora said.
Wednesday, December 2, 1998
IFC Still Keen on PAL
Malaya
Wednesday, December 2, 1998 (6)
Digest
Finance Secretary Edgardo Espiritu yesterday said that the International Finance Corp. is still interested in buying into the Philippine Airlines as long as a new partner is found. Espiritu said that IFC is willing to put up 20 to 30 percent of the 40 percent stake that will be sold to the foreign partner.
RP Needs Air Carrier
People's Journal
Wednesday, December 2, 1998
THE COUNTRY needs a dedicated cargo carrier to Japan to provide reliable and adequate air transport service to Filipino exporters.
This was the consensus of cargo forwarders as they expressed support for the entry of CLA Air Transport Inc. in the air cargo business.
CLA, a joint venture between the Philippine government, and Filipino and Japanese investors, plans to fly the Manila-Cebu-Japan route to primarily serve the air transport requirements of Filipino exporters to Japan, one of the country’s major trading partners.
“The entry of a new and dedicated cargo carrier is a much needed relief for expanding export-oriented industries in Cebu,” said Marose F. Borromeo, General Manager for Southern Philippines of Rapid Air Freight Inc.
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