In a disclosure to the Philippine Stock Exchange, Cebu Pacific said it will seek approval of a $250 million issuance of new convertible preferred shares, as well as another $250 million in privately placed convertible bonds.
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.”
The airline expects the fundraising proposal to be taken up in a special shareholders meeting on November 20, 2020.
The new convertible preferred shares will be made available to all stockholders, including parent company JG Summit Holdings, Inc., giving all investors an opportunity to participate; while the privately placed convertible bonds will be made available to a limited number of international investors.
JG Summit, which owns 67% of Cebu Pacific, will invest its proportionate share of the $250 million convertible preferred shares, offering it to existing shareholders for subscription. JG Summit further commits to take on any balance of unsubscribed shares in this general offering.
“We need to create a longer runway for CEB so that we can continue providing affordable and accessible air transport services for everyjuan,” Cebu Pacific and JG Summit president and chief executive officer Lance Gokongwei said.
Cebu Pacific is raising its capital as part of a multi-pronged approach to working with capital providers, creditors, suppliers and all other stakeholders, especially its employees, to further strengthen its financial position in the midst of this COVID-19 crisis.
In the first six months of 2020, the airline recorded revenues amounting to P17.3 billion, a 61.2% decline from the P44.7 billion revenues generated in the same period last year.
Cebu Pacific said the lockdowns imposed in various parts of the country led to cancellation of flights across its entire network. From March 15 to June 30, 2020 alone, around 44,000 flights were cancelled and 2.1 million passengers were affected. Cebu Pacific said it currently operates only about 15% of its pre-COVID 19 operations.
The airline said that since the start of this pandemic, it has been accelerating its transformation into an even more digitalized airline, resulting in a significantly reduced unit cost and allowing the carrier to continue offering affordable air travel.