OPINION

Malaya
Wednesday, December 30, 1998
[Column]
By Jesus C. Sison

Finance Secretary Edgardo Espiritu said that the Philippine Airlines will shut down again if the government fails to obtain financial assistance for the flag carrier. If PAL shuts down again, chances are it may not be able to make another comeback. President Estrada knows the difficulties that will arise if PAL closes down for the second time. That’s why he is helping PAL as strongly as he can.

Seven More Banks Seek More Time to Comment on PAL Plan

Business World

Wednesday, December 30, 1998

Seven banks, led by Allied Banking Corp., have asked the Securities and Exchange Commission for five more weeks within which to submit their comments on the rehabilitation plan of Philippine Airlines, Inc. (PAL).

Allied Bank filed the motion on behalf of China Banking Corp., Philippine Commercial International Bank (PCIBank), International Exchange Bank (iBank), Rizal Commercial Banking Corp. (RCBC), Equitable Banking Corp. (EBC) and Philippine National Bank (PNB). They form the syndicate which extended a $60-million loan to PAL.

Allied Bank had only until Dec. 23 to file its comments on PAL’s rehabilitation plan. “Due, however, to the number of creditor banks which are members of the syndicate, there is a need for more time to convene and discuss the merits of the rehabilitation plan,” it said in its motion.

This is the second group of banks which asked for more time to file their comment on PAL’s rehabilitation plan.

The other day, 10 local banks, led by PNB, which extended a $182-million syndicated loan to PAL, made the same request. The group asked for a 30-day extension. Allied Bank is also part of the group along with China Bank, EBC, iBank and RCBC.

The other members of the PNB-led syndicate are Banco de Oro, Philippine International Exchange Bank, Security Bank Corp., Union Bank of the Philippines, and Westmont Bank.

The PNB-led syndicate asked for until Jan. 24, 1999 to file its comment, saying they need the added time to sift through “the huge volume of information contained in the rehabilitation plan which needs to be carefully studied.”

This was the same reason cited by two other PAL creditors – Mobil Philippines, Inc. and Pratt & Whitney Canada, Inc. – which also sought an extension of their deadline.

Thus far, only a handful of creditors has filed their comments on PAL’s rehabilitation plan.

On its own, PNB objected to key provisions of the plan, particularly the proposal to restructure PAL’s capital which involves reducing the par value of its existing common shares to only P0.01 from the current P5 per share, PNB said this “will substantially dilute” its stake in PAL.

In its proposed rehabilitation plan, PAL said the capital restructuring will reduce the holdings of PAL employees to 5% from the existing 20%.

PNB also criticized the pricing used by PAL, saying the “valuation is to low.”

To this end, the bank sought clarification how PAL’s interim rehabilitation receiver “arrived at the P0.01 valuation of the share.”

Another local bank which had balked at certain components of the rehabilitation plan is PCIBank.

PCIBank’s objection concerns the 15-year maturity period PAL wants to ask of its creditors concerning its loan. It instead proposed a maturity period of only 10 years, inclusive of the grace and repayment periods.

PCIBank also opposed PAL’s proposal for creditors to waive interest charges on all “post-petition” loans including default interest.

“The suggestion is open-ended, hence, would be too onerous for acceptance,” the bank said in a motion filed at the SEC. — Maricris C. Carlos

PAL Recovery Faces Delay as Creditors Seek More Time to Review Rehab Plan

Philippine Daily Inquirer

Wednesday, December 30, 1998

By TINA ARCEO-DUMLAO

Business

THE RECOVERY of Philippine Airlines Inc. may be delayed as more creditors have asked the Securities and Exchange Commission for more time to submit their comments on the government’s rehabilitation plan for the cash-strapped flag carrier.

A syndicate of creditor banks under a $182-million loan and security agreement, through counsel Sycip, Salazar, Hernandez and Gatmaitan, said it would carefully study the plan before it could submit its comment.

The creditors asked the SEC for an additional 30 days, or until Jan. 24 next year, to submit its comment.

This group of creditors include Allied Banking Corp., Banco de Oro, China Banking Corp., Equitable Banking Corp., International Exchange Bank, Philippine National Bank, Rizal Commercial Banking Corp., Security Bank Corp., Union Bank of the Philippines and Westmont Bank.

Allied Bank, which represents seven commercial banks on a $60-million domestic syndication, also asked for more time to discuss the merits of the rehabilitation plan.

Allied Bank asked for an extension of five weeks from Dec. 23 or until the end of January next year to file its comment.

The SEC earlier directed the creditors to file their comments within 15 days from receipt of the order.

Only Credit Agricole IndosUez, Philippine Commercial International Bank and the Philippine National Bank were able to file their comments.

Pratt and Whitney Canada (SEA) Pte. Ltd. based in Singapore likewise asked for until Jan. 31 next year to submit its comment considering the huge volume of information contained in PAL’s rehabilitation plan.

PAL fuel supplier Mobil Philippines Inc., on the other hand, asked for 15 more days, or until Jan. 10, to file its comment.

The Airline Pilots Association of the Philippines, meanwhile, filed its comment on the rehabilitation plan. It expressed concern over a number of items, particularly on the fate of the airline’s employees.

Alpap said the plan was either “deliberately silent or no clear program at all for its employees.”

“The silence regarding their prospects betrays either a vacuity in concrete ideas in making the plan actually work or a foreboding of a scheme that is even more sinister than the suspension of the collective bargaining agreement,” Alpap said in its comment.

Alpap also raised concern over PAL’s plan to dispose of non-core assets such as catering, ground handling and maintenance.

“These departments may even be the ones that will ultimately make the differences between realized rehabilitation and eventual closure,” Alpap said.

Point of Order by Jose L. Guevara

Tempo

Tuesday, December 29, 1998

Point of Order

Jose L. Guevara

Erap was praised for skillfully negotiating the PAL crisis, for condemning human rights abuses in Malaysia, and making a good impression in his keynote address at the economic summit in Singapore.

Palace Upbeat on Happy Ending to Keep PAL Flying

The Journal

Tuesday, December 29, 1998

Negotiation to save Philippine Airlines will reach a happy conclu­sion next January, President Estrada predicted yesterday.

Mr. Estrada said he remains hope­ful that there will be a settlement with Hong Kong-based Cathay Pacific Air­ways, "hopefully by next month.”

"They're still negotiating and I hope they will settle it. Hopefully by next month,” he said when asked by reporters at the Ninoy Aquino International Airport (NAIA) about the progress of the negotiations.

The Chief Executive reiterated his administration's commitment to save PAL "at all costs," saying too much is at stake if the airline shuts down.

He explained that among the air­lines now operating in the Philippines, only PAL has the capability to fly to all domestic routes and carry passen­gers and cargoes to these destinations.

"We are trying our best to save PAL because if PAL closes, all busi­nesses will be affected," the President pointed out.

Mr. Estrada was at NAIA to lead government officials in welcoming overseas Filipino workers who came home for the holidays.

Last week, Executive Secretary Ronald Zamora disclosed that talks are still ongoing between PAL and possible strategic partners, including Cathay.

Zamora told in a radio interview that the parties are keeping the talks under wraps because they do not want any side issues to surface at this time.

However, he also reiterated the Estrada administration's position that the government will not take over PAL and assume its huge debts.

Earlier, Cathay announced it was pulling out of talks following specu­lations that a takeover of PAL man­agement may violate the 1987 Con­stitution.

Under the Constitution, foreign companies can own only up to 40 percent of any business fin in the Philippines.

Negotiation for a possible strate­gic partnership is one of two options to save PAL. The other is an infusion into the airline of part of the $30 billion Miyazawa Fund initiative for crisis-hit economies in East Asia.

The Philippines stands to get $3 billion in short-term loans and an­other $3 billion in long-term loans from the fund, according to Finance Secretary Edgardo Espiritu.

Espiritu also said the request to use the Miyazawa Funds must come from the government task force for the rehabilitation of PAL, the Securi­ties and Exchange Commission, and PAL management.