Cebu Pacific eyes up to P16 billion fresh capital

MANILA, Philippines — Cebu Pacific is hoping to raise anywhere from P12.5 billion to P16 billion within the first quarter on top of the P12.5 billion it intends to get from an ongoing stock rights offering as the budget carrier prepares for the worst, which is a slow recovery in air travel.

Cebu Pacific head of investor relations group Trina Asuncion said that aside from the equity capital raising, part of the company’s fundraising plan is also debt capital raising via syndicated loans through various commercial banks.

“Overall on the debt side we are raising anywhere from another P12.5 billion to maybe P16 billion. But it’s not final yet, but we’re quite confident that it will go positive. These are through various banks,” Asuncion said.

Asuncion said Cebu Pacific has one of the more prudent balance sheets, with its net debt to equity ratio still quite low.

“We’ve seen the support of all banks and these banks include financial institutions like Landbank, Development Bank of the Philippines. It’s not final yet, but we’re seeing the support on a general sense,” she said.

Cebu Air Inc., the operator of Cebu Pacific, started on Wednesday its stock rights offer of 328.947 million convertible preferred shares at P38 a share in a bid to raise P12.5 billion.

To enable the company to navigate the current environment and thrive in the new normal, 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.

Cebu Pacific vice president for marketing and customer experience Candice Iyog said the fresh capital would be enough to last beyond 12 months.

Iyog said Cebu Pacific does not see the recovery to pre-COVID levels this year, with the earliest possible recovery expected by 2022.

“We will recover, we just don’t know when that will be. But every investment we have right now is to ensure we not just preserve, but actually improve our long term proposition when it comes to the overall business model,” Iyog said.

Cebu Pacific is now at about 23 percent of its pre-COVID network, operating flights to 32 domestic destinations.

In terms of fleet, about half of its fleet of 73 are operating, while the rest are on storage and being preserved.

Asuncion said the company expects to receive a few aircraft this year, most of which will be replacement of planes that are either going to be returned to their lessors or are sold already.

She said there were also no cancellations and no reductions of aircraft orders with Airbus.

“We were able to spread it out. The fleet plan is now longer, between 2022 and 2027 to support us on what we call a U-shaped recovery. We have received the support of our supplier on that,” Asuncion said.