Shareholders okay $500-M CEB fund-raising plan

Published November 22, 2020, 7:00 AM

by James A. Loyola

Cebu Air Inc., the carrier operating under the name Cebu Pacific (CEB), has secured the approval of its shareholders for plans to raise about US$500 million from the issuance of convertible bonds and preferred shares.

 In disclosures to the Philippine Stock Exchange, the firm said its shareholders approved the issuance of warrants or bonds with detachable warrants, or other similar security instrument as an alternative to the convertible bonds.

Also approved is the increase in Cebu Air’s authorized capital stock from P1.34 billion to P1.74 billion through the creation of a new class of convertible preferred shares.

The underlying common shares of the Convertible Bonds or Warrants or Bonds plus Warrants will be listed with the PSE. The bonds will be offered via private placements.

Shareholders also greenlighted the plan to offer for sale or subscription of the Convertible Preferred

Shares via a stock rights offering.

The Convertible Preferred Shares and the underlying common shares of the Convertible Preferred Shares will also be listed with the PSE.

The fund raising is part of the firm’s business transformation plan to deal with the hard realities brought about the global health crisis.

Cebu Air noted that, “The airline industry faces significant challenges as a result of unprecedented events outside the control of the Corporation brought by the COVID-19 pandemic.”

 It added that, “Travel restrictions imposed by various governments, both local and abroad, have led to abrupt reduction in passenger traffic for the Corporation and casts uncertainty over the near term prospects of the Corporation despite its market leadership.”

“Due to this exceptional change in market conditions and industry dynamics, the Corporation saw the urgent need to fast track its transformation,” Cebu Air said.

It is currently implementing a business transformation exercise that involves right-sizing of network and fleet to meet new demand, and improvement of operations efficiency through process and policy enhancements and digitalization, among others.

Earlier, Cebu Air reported a 70 percent drop in nine-month revenues to P19.3 billion resulting in a net loss of P14.7 billion.