GSIS nixes PAL bid to defer put option by five years

The Government Service Insurance System (GSIS) has rejected the request of the Philippine Airlines (PAL) to postpone by another five years the implementation of its put option agreement.

The GSIS said it will give PAL up to July to implement the agreement. "If they do not we will be forced to go court," said GSIS president and general manager Winston Garcia during a press briefing.

Garcia said they would go after PAL or its two main guarantors Fortune Tobacco Corp. and Asia Brewery Inc. "If they do not have the cash by then, we will be forced to file a case," he added.

The put option agreement calls for the country’s flag carrier to buy the shares held by the GSIS and other government financial institutions (GFIs). The GSIS alone stands to earn an estimated P750 million from the sale of its PAL shares.

The other GFIs with stakes in PAL are the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), and the AFP-Retirement Service Benefits Systems.

Earlier, the Philippine National Bank (PNB) said it was tapping its put option, which should amount to about P2 billion. Failure by PAL to meet the payment would mean that again Fortune Tobacco and Asia Brewery would have to assume the responsibility of paying PNB.

Lucio Tan controls 53.79 percent of PAL while the Philippine government through its GFIs control 4.26-percent, and another 2.61 percent are held by PAL employees. The remaining equity is controlled by Wealth Equities, Maxell Holdings, Richmond Holdings, and other investors. – Ted Torres