PAL to undertake capital restructuring

Posted at 12/18/12 8:57 AM

MANILA, Philippines - National flag carrier Philippine Airlines (PAL), a unit of publicly-listed PAL Holdings Inc., is beefing up its capital stock to accommodate the entry of diversified conglomerate San Miguel Corp. (SMC) and pursue its aggressive re-fleeting program involving the acquisition of 100 aircraft.

PAL Holdings assistant corporate secretary Cecilia Pesayco informed the Philippine Stock Exchange (PSE) that PAL has filed an application with the Securities and Exchange Commission (SEC) to undertake a capital restructuring program.

Initially, Pesayco said the airline would decrease its authorized capital stock to P4 billion consisting of 20 billion shares with a par value of P0.20 per share from P16 billion composed of 20 billion shares with a par value of P0.80 per share

She pointed out that PAL would also implement a five-fold increase in authorized capital stock to P20 billion divided into 100 billion shares with a par value of P0.20 per share from P4 billion composed of P0.20 per share.

PAL Holdings raised its authorized capital stock to P23 billion from P20 billion last June 27 to accommodate the entry of diversified conglomerate San Miguel Corp. (SMC) in the airline controlled by taipan Lucio Tan.

PAL Holdings’ majority shareholder, Trustmark Holdings Corp., subscribed to the increase in authorized capital as well as certain unissued shares of PAL Holdings equivalent to 85 billion common shares worth P17 billion.

Last April, Trustmark Holdings entered into investment agreements with a unit of SMC wholly-owned subsidiary San Miguel Equity Investments Inc. (SMEII) for the acquisition of a 49 percent interest in PAL Holdings.

SMC infused $500 million to buy into PAL and affiliate budget carrier Air Philippines Corp. (AirPhil) through its 49 percent interest in PAL Holdings

The investment was made through SMEII. Under the agreement, Trustmark and Zuma Holdings and Management Corp. -the holding companies of PAL and AirPhil – would issue new shares to SMEII.

PAL is in the middle of a massive refleeting program wherein it intends to acquire 100 aircraft. It entered into a $7 billion deal with Toulouse-based EADS in August to acquire 54 new Airbus aircraft consisting of 34 A321ceo, 10 A321neo, and 10 A330-300s that would be delivered starting next year.

The airline also exercised an option to acquire 10 more wide-bodied planes in another contract worth about $2.5 billion last September.

PAL currently maintains and operates 39 aircraft comprising of five Boeing B747-400s and three B777-300ERs as well as four Airbus A340-300s, eight A330-300s, 15 A320-200s, and four A319-100s.

PAL president and chief operating officer Ramon S. Ang earlier told reporters that the airline is in the midst of negotiations for the acquisition of the remaining 35 aircraft.

PAL is set to mount flights to Turkey, Kuwait, and Cambodia next year as it awaits the lifting of the ban imposed on domestic carriers by the European Union and the US Federal Aviation Authority (FAA) due to safety issues.