PAL chairman raises fresh capital for airline

Asian Economic News, June 7, 1999

TOKYO, June 3 Kyodo

Philippine President Joseph Estrada said Thursday Philippine Airlines Chairman Lucio Tan has raised 200 million dollars in fresh capital crucial for resuscitating the ailing airline.

Estrada told a news conference that Tan gave him assurances Thursday, beating the June 4 deadline imposed by the Philippines' Securities and Exchange Commission (SEC) for him to raise the funds.

"The chairman of PAL told me that he has already gotten the capital to keep PAL going...so PAL will continue flying," Estrada told reporters at a Tokyo hotel. "My government will not in any way bail out PAL."

The Estrada government will never bail out any distressed private company or corporation, he said in an apparent move to assure foreign investors of his determination to stick to policies favoring privatization and deregulation.

It was not clear how Tan managed to raise the money. He has previously hinted he might not be able to raise enough capital to meet the SEC requirement to fund the rehabilitation plan.

Tan earlier placed 100 million dollars of the required capital in escrow and has tapped partners from Hong Kong for the 70 million dollars.

He was hoping that five government financial institutions which have direct and indirect equity investments in the beleaguered airline would exercise their pre-emptive right to infuse additional investments into PAL to raise the 30 million dollars to complete the needed 200 million dollars.

The government financial institutions, together with the national government, have a combined 15% stake in PAL. Yet they have said they were not infusing new money in PAL.