Low-cost carrier Cebu Pacific outlined its plans to raise US$250 million in a stock sale that it plans to use to pay down debt and to cope with the COVID-19 pandemic that has shut down international aviation in many areas and hurt all airlines around the globe.
The airline said in a stock exchange filing it plans to issue convertible preferred shares priced between US$0.74 and US$0.84 each. It plans to use the net proceeds to pay US$100 million for an advance by JG Summit Philippines; it will use US$71.3 million for aircraft operating lease payments due in 2021; it will use US$72.3 million for principal debt repayments due in 2021; and it will use US$6.4 million for general corporate purposes, which are primarily for passenger refunds in case cash inflows from operations become insufficient as a consequence of the COVID-19 pandemic’s impact to health and travel related concerns.
“The airline industry faces significant challenges as a result of unprecedented events outside the control of the corporation brought by the COVID-19 pandemic,” Cebu said in the filing. “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,” the airline 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 digitalisation, among others. This places the corporation in a better position to respond to this harsh reality.”
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