PAL receiver approves Baguio Gold debt swap

The rehabilitation receiver of Philippine Airlines (PAL) has posed no objection to company’s proposed acquisition by listed firm Baguio Gold Holdings Corp., saying the plan does not adversely affect the flag carrier’s amended recovery program.

In a disclosure to the Philippine Stock Exchange, Baguio Gold said it received yesterday a written confirmation from the permanent rehabilitation receiver of PAL, stating that the debt-to-equity swap between the company and Trustmark Holdings Corp. is not in conflict with the approved amended and restated rehabilitation plan.

Under the proposed transaction, Baguio Gold will acquire six companies jointly holding 81.57 percent of sister firm PAL for P136 million. Both Baguio Gold and PAL are owned by Filipino-Chinese tycoon Lucio Tan.

The six companies are Pol Holdings Inc., Cube Factor Holdings Inc., Ascot Holdings Inc, Sierra Holdings and Equities Inc., Network Holdings & Equities Inc. and Maxell Holdings Corp. The payment will be made over a 12-month period. The purchase price took into consideration the current book values of each of the companies, which are all negative.

Under the deal, five billion shares will be issued to Trustmark Holdings Inc., a holding company owned by Tan. These shares would give Trustmark 97.15 percent interest in Baguio Gold.

The shares to be issued by Baguio Gold will come out of the increase in its capital stock to P20 billion from only P400 million.

To support the capital increase, Baguio Goldsaid it would convert certain debt acquired in connection with the acquisition of indirect interests in PAL into equity. Upon completion of the transaction, Baguio Gold will be renamed PAL Holdings Inc.

Baguio Gold, formerly known as Baguio Gold Mining Co., was originally engaged in mineral exploration but shifted its main business to a holding firm in 1996. It had been on the look-out for possible acquisitions since 1998 but has not made any major investments prior to the PAL deal.

PAL has reduced its debt to just about $1.1 billion since it went under receivership in 1999. It has been adding more flights and upgrading its flee in view of the highly competitive business environment.

Tan bought into the airline in 1992. Eight years later, Tan acquired inactive mining firm Baguio Gold. This followed Tan’s acquisition of another listed company, Asian Pacific Equity Corp., which he renamed Tanduay Holdings.