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Home Aviation Cebu Pacific sets stock rights offer to raise US$250M

Cebu Pacific sets stock rights offer to raise US$250M

  • Cebu Pacific has scheduled for February 26 to March 4 its stock rights offering for proceeds of about US$250 million
  • Net proceeds from the offering will be used to strengthen the balance sheet by providing liquidity to address financial liabilities
  • The stock rights offering is part of the airline’s fundraising plan to enable Cebu Pacific to “navigate the current environment and thrive in the new normal”

Cebu Pacific has scheduled for February 26 to March 4 its stock rights offering for aggregate proceeds of about US$250 million, with an offer price of $0.74 to $0.84 per stock.

The number of shares to be offered has yet to be announced, according to Cebu Air, Inc., which operates as Cebu Pacific, in a regulatory disclosure.

The proposed convertible preferred shares stock rights offering “would be fair, transparent and equitable to all shareholders,” Cebu Pacific noted.

Cebu Pacific last year announced a $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 the 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 by the COVID-19 pandemic that is outside its control.

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

The net proceeds from the stock rights offering will be used to strengthen the corporation’s balance sheet by providing liquidity to address its financial liabilities.

These include a $100 million allocation for repayment of an advance by parent company JG Summit Philippines Ltd.; $71.3 million for aircraft operating lease payments due in 2021; $72.3 million for principal debt repayments due in 2021; and $6.4 million for general corporate purposes. The latter is 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.

Cebu Pacific noted, however, that “plans may change based on factors including changing market conditions or new information regarding the cost or feasibility of the plans.”

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 the COVID-19 outbreak, which saw all of the group’s commercial operations grounded since mid-March due to a government-declared community quarantine.

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 last June 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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