SEC okays capital hike of PAL Holdings

MANILA, Philippines - Publicly-listed PAL Holdings Inc., the parent firm of national flag carrier Philippine Airlines (PAL), has been given the green light by the Securities and Exchange Commission (SEC) to beef up its capitalization to fund the airline’s ongoing re-fleeting program.

PAL Holdings assistant corporate secretary Cecilia Pesayco said in a letter to the Philippine Stock Exchange (PSE) that the corporate regulator approved the company’s amendments to its articles of incorporation to reflect the increase in capitalization to P23 billion from P20 billion last Dec. 12.

“Please be advised that the company’s application for an increase in authorized capital stock from P20 billion divided into 20 billion common shares with a par value of P1 per share to P23 billion divided into 23 billion common shares with a par value of P1 per share was approved by the SEC,” Pesayco told the exchange.

The increase in authorized stemmed from the entry of diversified conglomerate San Miguel Corp. into PAL and in order to raise more funds for the expansion of the flag carrier that is acquiring 100 aircraft as part of its re-fleeting program.

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

Last April, Trustmark Holdings entered into investment agreements with a unit of SMC, resulting in the issuance of shares to the diversified conglomerate that took a 49 percent stake in PAL Holdings.

SMC is buying into PAL and affiliate budget carrier Air Philippines Corp. (AirPhil) through several layers of holding companies. This will lead to SMC’s acquisition of 49 percent of PAL’s publicly-listed parent firm PAL Holdings, which in turn will give it effective control of at least 40 percent of PAL.

As part of the package, SMC would get 49 percent of AirPhil. SMC would pay $500 million for these indirect stakes in PAL and AirPhil.

The investment was made by SMC through a wholly-owned unit, San Miguel Equity Investments Inc. (SMEII). Under the agreement, Trustmark and Zuma Holdings and Management Corp. – the holding companies of PAL and AirPhil.

Early this week, PAL also announced that it was undertaking a capital restructuring as part of the entry of SMC as well as to pursue its aggressive re-fleeting program involving the acquisition of 100 aircraft.

Initially, 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.

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 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.