By Arjay L. Balinbin, Senior Reporter
CEBU AIR, Inc., the listed operator of budget carrier Cebu Pacific, is seeking to raise about $500 million in fresh capital to “strengthen” its balance sheet, as the industry fights for survival amid the ongoing coronavirus pandemic.
In a disclosure to the stock exchange on Thursday, Cebu Air said it “intends to undergo a fundraising plan” that will enable it to “navigate the current environment and thrive in the new normal.”
It added it aims to raise “aggregate proceeds of approximately $500 million.”
The fundraising plan involves a “convertible preferred share rights issue for an aggregate proceeds of about $250 million” and “a private placement of convertible bonds with aggregate subscription price of up to $250 million.”
Aside from boosting its balance sheet, Cebu Air plans to use part of the proceeds for general corporate purposes.
In a separate disclosure, the Cebu Pacific operator noted an urgent need to fast-track its transformation because of the “exceptional change in market conditions and industry dynamics.”
The business transformation involves “right-sizing of the network and fleet to meet new demand, and improvement of operations efficiency through process and policy enhancements and digitalization, among others,” Cebu Air said.
Cebu Air has scheduled a special stockholders’ meeting on Nov. 20, where it will be seeking the shareholders’ approval to increase the company’s authorized capital stock from P1.3 billion to P1.7 billion and “create a new class of convertible preferred shares with a par value of P1.00 per share.”
It said the issue price of the convertible preferred shares rights issue and the convertible bonds private placement “will be decided based on various factors, including the prevailing market price at such relevant time, and the broader equity capital market conditions.”
“The conversion price of the convertible preferred shares and the convertible bonds is expected to be the same and to be set within P38 to P45 range, representing 2% to 21% conversion premium over Cebu Air’s 30-day volume weighted average price from August 26, 2020 to October 7, 2020,” the company added.
Cebu Air previously reported a net loss of P7.96 billion for the second quarter, reversing a profit of P3.79 billion in the same period last year.
The government-imposed travel restrictions during the period resulted in a nearly 93% decline in the company’s gross revenues to P1.42 billion from P23.53 billion in the year-earlier period.
Shares in Cebu Air on Thursday closed 1.21% lower at P36.65 apiece.