Cebu Air, Inc. (CEB) today ( March 5) signed a P16 billion ten-year term loan facility with a syndicate of domestic banks.
The airline's lenders include the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP), along with Asia United Bank Corporation (AUB), Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Company (MBTC) and Union Bank of the Philippines (UBP).
CEB will use the proceeds of the loan to fund its capital expenditures and other general corporate purposes.
The loan will also provide a cushion against unexpected working capital requirements that may stem from fuel price and foreign exchange rate volatility.
The syndicated loan was a landmark deal demonstrating a strong partnership between government financial institutions and private domestic banks to support CEB after it was hard hit by the pandemic.
It also showed the confidence of the institutions in the recovery of the Philippine economy.
“We view this facility as a collective effort between the government and the private sector in assisting a strategic industry that plays a pivotal role in our country’s economic recovery from this pandemic," DBP President and CEO Emmanuel Herbosa commented.
"As the country’s infrastructure bank, DBP remains at the forefront of supporting the transport and logistics sector which ensures essential movement of people, goods and services across our archipelago.”
"LANDBANK fully supports the recovery of the aviation industry in the new normal," says LBP President and CEO Cecilia Borromeo.
"This forms part of our continuing commitment to respond to the financial requirements of key sectors and contribute to revitalizing our local economy.”
“The transaction serves as a good example of the banks’ preparedness to assist leading and strong institutions heavily impacted by the pandemic," noted BPI President and CEO Cezar Consing.
"We understand how vital the survival of the airline is to our economy.”
“JG Summit and Cebu Pacific are grateful for the confidence of the Philippine banking community, given the participation by both the government owned financial institutions and the private sector commercial banks in this landmark syndicated loan facility," remarked CEB President and CEO Lance Gokongwei.
"Cebu Pacific remains focused on its business transformation to reduce its unit cost so as to continue to offer affordable flights and remain as our country’s airline for everyone,” he added.
Cebu Pacific was in a unique situation among its airline peers in that it entered into the COVID pandemic with a historically strong ability to generate free cash flow.
It achieved a strong liquidity position as of 31 December 2019, and ended 2019 with a conservative net debt-to-equity ratio of 1.26x.
While CEB sustained severe revenue decline and losses due to the COVID-19 pandemic, its net debt-to-equity ratio was still at a strong 2.34x as of 30 September 2020.
The strong balance sheet and liquidity, with which the company entered 2020, has supported it in this challenging environment.
Last month, CEB set the final terms of its P12.5 billion convertible preferred share stock rights offering in which its principal shareholder, CPAir Holdings, Inc. (a JG Summit company) expressed its full support by undertaking to subscribe its pro-rata share and any remaining unsubscribed rights in the offer.
The syndicated loan facility, together with the offer, will strengthen CEB’s balance sheet and liquidity position.
BPI Capital Corporation acted as the Mandated Lead Arranger and Bookrunner for this transaction.
In addition, DBP & LBP acted as Mandated Lead Arrangers, AUB as Lead Arranger and MBTC & UBP as Arrangers for the syndicated loan facility.
AUB – Trust and Investments Group was appointed as the Facility Agent.