PAL Holdings, the parent firm of Philippine Airlines, has shifted gears with a fresh strategy. They’ve revised their request to the Philippine Stock Exchange to hike their authorized capital, factoring in extra share subscriptions coming from a share swap.
The Intricacies of the Share Swap
On July 4, PAL Holdings submitted a filing to the Philippine Stock Exchange, stating that “certain creditors” of Philippine Airlines traded 323.77 million of their common shares in the airline for a staggering 5.041 billion shares in PAL Holdings. The exchange rate was set at one PAL share for 15.57 PAL Holdings’ shares.
A total of 46 entities participated in this share swap, amongst them were subsidiaries of big-name companies like Avolon, Macquarie AirFinance, Philippine National Bank, Rolls-Royce, and ORIX Aviation Systems. Interestingly, the share swap was over and above the cash already procured by PAL Holdings through its prior choice to augment its capital.
In a calculated move, PAL Holdings aims to boost its authorized capital stock from PHP13.5 billion Philippine pesos ($243.2 million) to a whopping PHP30 billion ($540.5 million). The goal behind this move is to pave the way for an influx of funds from connected entities into the company.
The Role of Creditors in the Transformation
Back in February, PAL Holdings’ board gave the green light to issue over 5.6 billion common shares to unsecured creditors in return for shares in PAL. But in the filing this week, PAL Holdings mentioned that not all creditors jumped on board with the share swap.
In the final months of 2021, PAL successfully managed to come out of the US Chapter 11 bankruptcy provisions, erasing around USD2 billion in debts. 2022 witnessed a strong financial performance by the airline, despite carrying lease and debt obligations amounting to PHP20 billion ($360 million) in the year leading up to June 30, 2023.
Lucio Tan-associated entities, which own PAL Holdings, made it clear that they intend to plow back the raised capital into the airline. This show of faith and financial commitment to PAL ensures its solid footing as it moves forward.
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