Philippine-listed low-cost airline Cebu Pacific Air is raising up to $500 million to finance its restructuring efforts after being severely hit by the COVID-19 pandemic, the airline disclosed Thursday.
The fundraising plan involves a convertible preferred shares rights issue for about $250 million and a private placement of convertible bonds of up to $250 million.
“The corporation would also like to highlight that the proposed Convertible Preferred Shares Rights Issue and Convertible Bonds Private Placement would be fair, transparent, and equitable to all shareholders,” Cebu Pacific said.
The company 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.
Cebu Pacific admits that it is operating at only about 15 per cent of its pre COVID-19 operations as lockdowns imposed in various parts of the country led to cancellation of flights across the corporation’s entire network.
“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,” the company said in its disclosure.
From March 15 to June 30, 2020 alone, around 44,000 flights were cancelled and 2.1 million passengers were affected. In the first six months of the year, Cebu Pacific recorded revenues amounting to P17.3 billion $357 million), a 61.2 per cent decline from the P44.7 billion ($922 million) revenues generated in the same period last year.
Cebu Pacific said the proceeds from the fundraising activity shall be used to strengthen the balance sheet of the corporation and for general corporate purposes.
The Board of Directors of the company is also seeking shareholders’ approval to amend the Amended Articles of Incorporation to increase its authorized capital stock from P1.34 billion ($28 million) to P1.74 billion ($36 million) and create a new class of convertible preferred shares with a par value of P1.00 per share.
The determination of the final terms and conditions of the convertible preferred shares rights issue and the convertible bonds private placement has been delegated to the company’s Board of Directors.
However, Cebu Pacific said the issue price of such offerings will be decided based on various factors, including the prevailing market price at such relevant time, and the broader equity capital market conditions.
Last week, Cebu Pacific said it has already refunded nearly half of the almost P5 billion ($103 million) in ticket sales.