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Cebu Pacific bares final terms of P12.5B stock rights offer

  • Cebu Pacific has set the final terms of its stock rights offer to raise P12.5 billion
  • The airline will offer 328.947 million of cumulative, non-voting, non-participating convertible preferred shares as “entitlement rights” at an offer price of P38 per entitlement right
  • The stock rights offer is scheduled from March 3 to 9, while the target listing/issue date on the local bourse is on March 29
  • The stock rights offer is part of a fundraising plan to enable Cebu Pacific “to navigate the current environment and thrive in the new normal”

Cebu Pacific has set the final terms of its stock rights offer to raise P12.5 billion.

Cebu Air, Inc., which operates as Cebu Pacific, in a statement said it will be offering 328.947 million of cumulative, non-voting, non-participating convertible preferred shares as “entitlement rights” at an offer price of P38 per entitlement right. The rights carry a 6% dividend yield per annum and the conversion price is set at P38 per share.

The stock rights offer is scheduled from March 3 to 9, while the target listing/issue date on the local bourse is on March 29.

The stock rights offer is part of Cebu Pacific’s US$500 million fundraising plan to raise additional capital by issuing up to $250 million in new convertible preferred shares, as well as another $250 million in privately placed convertible bonds.

READ: Cebu Pacific eyes $500M in fresh capital

To be called the Business Transformation Fundraising Plan, the fundraising aims to enable Cebu Pacific to “navigate the current environment and thrive in the new normal.”

In an earlier disclosure, Cebu Pacific said it “saw the urgent need to fast track its transformation” due to the “exceptional change in market conditions and industry dynamics” brought on by the COVID-19 pandemic that is outside the company’s control.

It noted that travel restrictions imposed by various governments, both local and abroad, have sharply reduced passenger traffic and cast “uncertainty over the near term prospects of the corporation despite its market leadership.”

The proceeds from the offer will be used to strengthen the company’s balance sheet by providing liquidity to address its financial liabilities. These include P4.805 billion allocation for repayment of an advance by parent company JG Summit Philippines Ltd.; P3.913 billion allocation for aircraft operating lease payments due in 2021; P3.328 billion allocation for principal debt repayments due in 2021; and P0.384 billion allocation for general corporate purposes, which are primarily for passenger refunds in case cash inflows from operations become insufficient as a consequence of the COVID-19 pandemic’s impact on health and travel-related concerns.

The airline and its sister companies recorded a 69.6% decline in revenues to P19.34 billion in the first nine months of 2020, a massive decline from the P63.62 billion in revenues earned in the same period a year ago. The fall was due to all of the group’s commercial operations being grounded since mid-March 2020 due to a government-declared community quarantine in the wake of the COVID-19 outbreak.

Prior to this, the group had operated 78 domestic routes and 25 international routes with a total of 2,717 scheduled weekly flights.

Following the gradual revival of operations in June last year with the easing of quarantine restrictions, the group as of September 30 operates a network serving 34 domestic and eight international routes with a total of 372 scheduled weekly flights.

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