MANILA, Dec 19 (Bloomberg): Philippine Airlines Inc. won court approval for its reorganisation plan, paving the way for the carrier to exit bankruptcy, cut $2 billion in debt and revive its fortunes after a slump in international travel due to the pandemic.
US Bankruptcy Judge Shelley Chapman in Manhattan said Friday (Dec 17) that she would approve the Chapter 11 plan after unsecured creditors voted to back the proposal. The reorganization didn’t face any major opposition from debt holders.
"This case is a model for what can be accomplished in chapter 11,” Chapman said. "You’ve achieved overwhelming consensus.”
The company will try implement the plan and exit bankruptcy by the end of the year, if it is able to get approval from securities regulators in the Philippines, a lawyer for the airline said during the court hearing Friday.
The global aviation sector has taken a beating as international travel ground to a halt due to Covid-19. The emergence of the omicron virus variant has triggered new border restrictions and business closures, clouding the outlook for recovery.
The flagship carrier, majority owned by billionaire Lucio Tan, is one of several to enter debt restructuring in the U.S., which companies often consider a preferred location. Aeromexico and Colombia’s Avianca Holdings sought court protection in New York last year.
Philippine Airlines already got a green light to access $505 million worth of equity and debt financing to help it meet its obligations. As part of the turnaround, it plans to reduce the size of its fleet.
The outcome of its New York proceedings could set a precedent for carrier PT Garuda Indonesia, which was ordered by judges in Jakarta to embark on a court-supervised debt restructuring process.
The case is Philippine Airlines Inc., 21-11569, U.S. Bankruptcy Court for the Southern District of New York (Manhattan). - Bloomberg