Cebu Air Inc., the operator of budget carrier Cebu Pacific, said Thursday it will raise $500 million in additional capital to ensure it is well-positioned to recover from the impact of COVID-19.
The airline unit of the Gokongwei Group, said it notified the Philippine Stock Exchange about its plan to issue $250 million in new convertible preferred shares and another $250 million in privately-placed convertible bonds.
It said the transactions would be taken up in a special shareholders’ meeting on Nov. 20, 2020.
The new convertible preferred shares will be made available to all stockholders, including JG Summit, giving opportunity for all investors to participate while 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 every Juan,” said Cebu Pacific president and chief executive Lance Gokongwei.
The airline is raising the capital as part of its multi-pronged approach to working with capital providers, creditors, suppliers and other stakeholders, especially its employees, to further strengthen its financial position amid the crisis.
It said that since the start of the pandemic, it had worked 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.
The 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.”
Gokongwei said Cebu Pacific is an important part of JG Summit Holdings Inc.’s investment portfolio. “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 said.
He said the capital raising exercise represents a strong support and commitment on the part of JG Summit to provide financial support to CEB.
JG Summit, the parent and 67-percent owner of CEB, will invest its proportionate share of the $250-million convertible preferred share, which will be offered to existing shareholders for subscription. JG Summit said it would take on any balance of unsubscribed shares in the general offering.