Cebu Air bares use of proceeds from $250 million stock rights offering

MANILA, Philippines — Cebu Air Inc., the operator of budget carrier Cebu Pacific, has bared the intended use of proceeds from its upcoming $250 million fund raising plan.

In a stock exchange filing, Cebu Air said $100 million from the net proceeds would be allocated for repayment of an advance by JG Summit Philippines Ltd., while $72.3 million would be used for principal debt repayments due this year.

Some $71.3 million is allocated for aircraft operating lease payments also due this year, and $6.4 million will be utilized for general corporate purposes.

Cebu Air said the general corporate purposes are primarily for passenger refunds in case cash inflows from operations become insufficient as a consequence of the pandemic’s impact to health and travel related concerns.

“The corporation intends to use the net proceeds to strengthen the corporation’s balance sheet by providing liquidity to address its financial liabilities,” it said.

Cebu Air said the estimates on the use of proceeds are based on its current plans and anticipated expenditures.

“The plans may change based on factors including changing market conditions or new information regarding the cost or feasibility of the plans,” the company said.

Given the mounting losses due to the pandemic, Cebu Air last year announced plans to raise up to $500 million in fresh capital, which will involve the issuance of up to $250 million in new convertible preferred shares, as well as another $250 million in privately placed convertible bonds.

The convertible preferred shares stock rights offering will commence on Feb. 26 and end on March 4. Offer price is from $0.74 to $0.84 apiece.

Cebu Pacific was expecting losses in 2020 to reach almost P25 billion, a reversal of the P9.12 billion in net income the airline posted in 2019.

The airline has incurred a net loss of P14.69 billion in the nine months ending September last year as revenues plunged by 70 percent compared to the previous year’s level.

Cebu Air’s fundraising exercise is seen to “enable the company to navigate the current environment and thrive in the new normal.”