Cebu Pacific, the country’s largest budget airline, is selling shares and bonds to raise over $500 million (P24.2 billion) to weather an industry-wide crisis triggered by the COVID-19 pandemic.
Publicly listed operator Cebu Air Inc. announced a plan to sell $250 million in convertible preferred shares and $250 million in convertible bonds.
The fundraising measure, which comes amid the slow arrival of financial support from the government, follows other cost-cutting programs undertaken by the airline.
These included reducing its workforce by 25 percent and sending aircraft overseas for long-term storage as its business remains at about 15 percent of operations prepandemic.
Cebu Air, owned by the Gokongwei family’s JG Summit Holdings Inc., said the money would strengthen its position “to withstand the financial challenges it faces as it slowly goes back to pre-COVID business levels and settles into the new normal.”
“We need to create a longer runway for CEB so that we can continue providing affordable and accessible air transport services for ‘everyjuan’ [everyone],” Lance Gokongwei, president and CEO of Cebu Pacific and JG Summit, said in a separate statement.
Cebu Air said the convertible bonds would be issued to a limited number of “reputable international investors” while the preferred shares would be offered to all existing shareholders.
Moreover, JG Summit committed to buy any unsold preferred shares.
Cebu Air, which is seeking government approval to expand its capital by nearly a third, said the issue price has yet to be set and the conversion price would range from P38 to P45 per share.
Gokongwei said Cebu Pacific remained a strategic part of JG Summit’s portfolio, which spans food and drinks, property, banking, petrochemicals, energy and telecommunications.
“We strongly believe in the airline’s vital mission of providing fundamental and value-for-money air travel in and out of our country, and its crucial role as a driver for economic growth,” he said.
Like other carriers, the company is also suffering heavy losses due to the pandemic.
During the first semester of 2020, Cebu Air posted a P9.1-billion loss, reversing a P7.14-billion profit from January to June last year.
Passenger revenues during the period dropped 65.5 percent to P11.5 billion as passenger traffic fell to 4.5 million in the first semester of 2020 from 11.2 million last year.
From March 15 to June 30, around 44,000 flights were canceled, affecting 2.1 million passengers, Cebu Pacific said.