Cebu Air, Inc. (CEB) seeks to raise up to $500 million additional capital to strengthen its balance sheet and ensure its recovery from the ravages of the COVID-19 pandemic.
CEB now seeks Philippine Stock Exchange (PSE) approval for the issuance of up to $250 million in new convertible preferred shares, as well as another $250 million in privately placed convertible bonds.
The approvals for the issuance of the preferred shares, as well as the convertible bond, will be taken up in a special shareholders meeting next month, November 20, 2020.
The new convertible preferred shares will be made available to all stockholders, including JG Summit, giving opportunity for all investors to participate.
On the other hand, the privately placed convertible bonds, will be made available to a limited number of reputable international investors.
“We need to create a longer runway for CEB so that we can continue providing affordable and accessible air transport services for everyone,” according to Lance Gokongwei, President and CEO of Cebu Pacific and JG Summit Holdings, Inc.
CEB is raising this capital as part of its multi-pronged approach to working with capital providers, creditors, suppliers and all other stakeholders, especially its employees, to strengthen its financial position in the midst of the pandemic.
Since the crisis started, CEB has been working on accelerating its transformation towards becoming an even more digitalized airline, resulting in a significantly reduced unit cost, allowing the carrier to continue offering affordable air travel.
CEB's capital raising exercise will provide the airline with the needed runway to withstand the financial challenges it faces as it slowly goes back to pre-COVID business levels and settles into the “new normal.”
CEB is an important part of the conglomerate’s investment portfolio, Gokongwei stressed.
“We strongly believe in the airline’s vital mission of providing fundamental and value-for-money air travel in and out our country, and its crucial role as a driver for economic growth,” he explained.
The airline's capital raising exercise represents strong support and commitment on the part of JG Summit Holdings, Inc. (JGSHI) to provide financial support to CEB.
JGSHI, parent and 67% owner of CEB, will invest its proportionate share of the USD250 million convertible preferred share, which will be offered to existing shareholders for subscription. JGSHI further commits to take on any balance of unsubscribed shares in this general offering.
CEB ended 2019 with a strong balance sheet.
Its net debt to equity ratio end of first semester, 2020 is only 1.9x, still very low in the industry, thus allowing the carrier to raise more capital.
CEB is the largest carrier in the Philippine air transportation industry, offering its low-cost services to more destinations and routes with higher flight frequency within the Philippines than any other airline.
CEB and subsidiary Cebgo fly to 37 domestic and 25 international destinations, with over 100 routes.
The CEB network operates flights out of seven strategically placed hubs in the Philippines: Clark, Davao, Cagayan de Oro, Kalibo, Cebu, Iloilo and Manila.
The Cebu Pacific fleet is comprised 76 aircraft—six Airbus A321NEO, five A320NEO, seven Airbus A321CEO, 30 Airbus A320, eight A330, seven ATR 72-500, 13 ATR 72-600, and an ATR Cargo Freighter.
CEB has of one of the youngest fleets in the world, with an average fleet age of five years.
A member of the International Air Transport Association (IATA), Cebu Pacific has achieved full compliance with IATA Operational Safety Audit (IOSA)—considered as the benchmark of the highest standards for safety in the airline industry.
It has joined a roster of 429 airlines worldwide that have strictly complied with the most stringent of international standards governing aviation safety.