IFC, Indigo invest $250M to keep Cebu Pacific flying

Budget carrier Cebu Pacific is raising more cash to boost its war chest during the COVID-19 crisis, announcing on Monday a $250-million (P12.1 billion) investment from global funds.

Holding company Cebu Air Inc. said in a stock exchange filing on Monday its board approved the investment from International Finance Corp. (IFC), IFC Emerging Asia Fund and Indigo Philippines LLC.

IFC is a member of the World Bank Group while Indigo Partners LLC is a US-based private equity firm. Indigo specializes in aviation investments, which have included Frontier Airlines (US), Volaris (Mexico), Wizz Air (Hungary) and JetSMART (Chile).

The investment will be made through convertible bonds and will be closed over the next few weeks, following the completion of post-signing requirements.

The deal was announced after Cebu Air earlier raised some P28.5 billion from equity and debt.

Of the amount, P12.5 billion came from the sale of convertible preferred shares to existing stockholders. Cebu Air separately sealed a P16-billion term loan facility from a consortium of government and private banks.

The additional funds will help the country’s largest budget carrier settle obligations, support ongoing operations and continue its fleet modernization for the eventual recovery in air travel.

The scale of COVID-19’s damage to the industry was seen in Cebu Air’s latests financial statement.

In 2020, Cebu Air swung to a P22.2-billion loss compared to a P9.12 billion profit the previous year.

Total revenues fell 73 percent as passenger ticket sales collapsed. Amid rolling lockdowns and travel restrictions, Cebu Pacfic served just five million passengers in 2020 compared to 22.5 million flyers in 2019.

Cebu Air said the convertible bonds sold to IFC and Indigo will have a conversion price of P38 apiece. INQ