Philippine Airlines (PAL) is close to securing a "back-door" listing on the local stock exchange as it continues its recovery from near bankruptcy.

A take-over proposal is on the table that would see 85% of PAL coming under the control of the listed Baguio Gold Holdings, which would then be re-named PAL Holdings.

The ownership changes are being carried out by way of a share swap that effectively puts more of the airline under the direct control of PAL's majority owner and chairman, Lucio Tan. He owns more than 50% of PAL through various companies, while others close to him own more than 30%.

Baguio Gold is acquiring the 85% of PAL through a share swap made possible by an increase in its capital base to 5 billion pesos ($100 million), a rise from 400 million pesos.

In October, the Lucio Tan Group of Companies purchased 69% of Baguio Gold, a dormant mining firm, and announced it would issue new shares in exchange for near total control of PAL.

Tan has said in the past that he wants PAL listed to help it raise cash, but the airline cannot carry out an initial public offering as it does not meet rules requiring profitability for three consecutive years. Tan has also said that he intends to sell his shares in the airline but has yet to find a buyer.

The troubled carrier entered receivership in June 1998 with debts of over$2 billion. As part of an agreement with the Philippine Securities and Exchange Commission designed to protect it from creditors, PAL drew up a rehabilitation plan that provided for a $200 million cash injection, reduced fleet and route networks, the resumption of some debt repayments and the sale of assets.

These moves saw passenger numbers fall from 7.5 million in 1998 to just over 5 million in 1999, while staff numbers fell from 13,500 people to 8,200.

While the carrier has been recovering since then and reported a profit for the year ended March of $1.1 million, it has been forced to slash net profit forecasts for the current financial year as a result of higher fuel costs and a political crisis which is hurting the Philippine economy.

Source: Airline Business