Cebu Pacific has approved a US$250-million investment in the form of convertible bonds, the second part of its $500 million fundraising plan
The convertible bonds from International Finance Corp. (IFC), IFC Emerging Asia Fund, and Indigo Philippines LLC were approved by the Cebu Pacific board in a special meeting on April 16
Shares for the convertible bonds number 318.750 million and has a P38 conversion price
Loss-making Cebu Pacific has raised US$250 million in investment from private investors, the fresh infusion representing the second part of the low-cost carrier’s $500 million fundraising plan to jump start its recovery.
The investment in the form of convertible bonds from the International Finance Corp. (IFC), IFC Emerging Asia Fund, and Indigo Philippines LLC was approved by the Cebu Pacific board in a special meeting on April 16, the carrier said in a regulatory disclosure.
On the same date, Cebu Pacific also signed an agreement with the three investors to receive the $250 million convertible bonds.
The number of underlying shares for the convertible bonds is 318.750 million common shares with a P38 conversion price.
Transaction closing is subject to post-signing deliverables, which the parties expect to complete over the succeeding weeks.
The IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. The IFC Emerging Asia Fund, on the other hand, is a $693 million private equity fund managed by the IFC Asset Management Company.
Indigo Partners, meanwhile, is a US-based private equity firm that specializes in investing in the aviation sector. Its current airline investments include Frontier Airlines (USA), Volaris (Mexico), Wizz Air (EU) and JetSMART (Chile).
The $250-million convertible bonds are part of the $500 million fundraising plan—called the Business Transformation Fundraising Plan—that Cebu Pacific announced last year.
The plan had also included raising additional capital by issuing up to $250 million in new convertible preferred shares. Last March, the airline’s convertible preferred shares were successfully listed on the Philippine Stock Exchange, providing Cebu Pacific with P12.5 billion in fresh capital.
The fundraising aims to enable Cebu Pacific to “navigate the current environment and thrive in the new normal.”
The carrier 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 addition to the two fundraising programs, Cebu Pacific last March 5 signed a 10-year term loan facility amounting to P16 billion with a syndicate of domestic banks.