DBP to treat put option in PAL like any other loan

The Development Bank of the Philippines (DBP) said it would treat its put option in the Philippine Airlines (PAL) "like any commercial issue."

In a press briefing yesterday, newly-installed DBP president and chief executive officer Simon R. Paterno said "it is a commercial matter where a bank needs the money from a commercial loan."

Under the put option agreement, the country’s flag carrier is required to buy the 4.26-percent PAL shares held by the government financial institutions (GFIs) which include the Land Bank of the Philippines (LBP), the AFP-Retirement Service Benefits Systems, the Government Service Insurance System (GSIS) and the DBP.

The value of the PAL shares held by DBP has not yet been determined. DBP is said to have the smallest amount of PAL common shares held by the GFIs.

The biggest slice is said to be held by the GSIS, which reportedly stands to earn over P750 million from the sale of its shares if the put option is availed of.

Paterno said they expect PAL to pass on the responsibility of fulfilling the put option through its guarantors, the Fortune Tobacco Corp. and Asia Brewery Inc., both sister companies of PAL and under the control of tobacco magnate Lucio Tan.

PAL had sought an extension of the deadline for PAL to comply with put option which is set in July. Tan is seeking a five-year extension of the deadline.

The GSIS rejected the request and from all indications the rest of the GFIs are inclined to do the same.

GSIS president and general manager Winston Garcia said that in the event PAL or its guarantors fail to meet the July deadline, "we will be forced to go court."

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