Tycoon Lucio Tan Poised To Inject Fresh Capital Into Cash-Strapped Philippine Airlines

Billionaire Lucio Tan is poised to inject fresh capital into cash-strapped Philippine Airlines after PAL parent PAL Holdings this week approved the increase in its authorized capital to 30 billion pesos ($586 million) from 13.5 billion pesos.

“The purpose of the proposed increase of authorized capital of the issuer is to accommodate the fresh infusion of capital into the company by an affiliate company of the Lucio Tan Group of Companies,” PAL Holdings said in a filing on Tuesday to the Philippine Stock Exchange. “The new capital will in turn be invested into the issuer’s subsidiary, Philippine Airlines, pursuant to the court-supervised reorganization of PAL.”

The fresh capital infusion from Tan is key to the restructuring plan that PAL submitted this month as part of the bankruptcy filing in the U.S. that will pave the way for the rehabilitation of the airline amid mounting losses arising from pandemic-induced global travel restrictions. Tan holds a 76.9% stake in Philippine-listed PAL Holdings, while Japanese carrier ANA Holdings holds another 9.5% stake.

Under the plan, PAL’s creditors have agreed to reduce the company’s debts by as much as $2 billion, while the airline seeks to raise $505 million in long-term equity and debt financing from its majority shareholder and an additional $150 million debts from new investors.

The plan empowers PAL to overcome the unprecedented impact of the global pandemic, Tan, 87, PAL’s chairman and CEO, said in a statement after the airline’s bankruptcy filing on September 3.

Airlines are among the hardest hit by the pandemic as governments around the world imposed lockdowns and restricted cross-border travel to curb the further spread of the virus. The International Air Transport Association estimates airlines around the world will lose about $48 billion this year after incurring about $126 billion in losses last year.

PAL, which reported a record net loss of 73 billion pesos in 2020, continued to struggle this year, incurring a further net loss of 16.6 billion pesos in the first-half ended June 30.

Tan—who emerged as PAL’s controlling shareholder in 1995 when he was appointed chairman—regained control of PAL in in 2014 after buying San Miguel Corp.’s controlling interest in the airline. With a net worth of $1.9 billion, Tan, was ranked No. 12 on the list of the Philippines’s 50 Richest that was published earlier this month. His business empire spans tobacco, spirits, banking and property.