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Cebu Pacific inks P16 billion term loan with local banks

Richmond Mercurio (The Philippine Star) - March 6, 2021 - 12:00am

MANILA, Philippines — Cebu Air Inc., the operator of budget carrier Cebu Pacific, has signed a P16 billion 10-year term loan facility with a syndicate of domestic banks.

Cebu Pacific will use the proceeds of the loan to fund its capital expenditures and other general corporate purposes.

The company said the loan would also provide a cushion against unexpected working capital requirements that may stem from fuel price and foreign exchange rate volatility.

“We at JG Summit and Cebu Pacific are grateful for the confidence of the Philippine banking community, given the participation by both the government-owned financial institutions and the private sector commercial banks in this landmark syndicated loan facility,” Cebu Pacific president and CEO Lance Gokongwei said.

Cebu Pacific said the term loan facility, which was participated in by government financial institutions and leading private sector domestic banks, shows the confidence of these institutions that the budget carrier will continue to play a leading and vital role in the country’s economic recovery.

Cebu Pacific said it was in a unique situation among its airline peers because it entered into the COVID pandemic with a historically strong ability to generate a free cash flow.

It ended 2019 with a conservative net debt-to-equity ratio of 1.26x and while it sustained severe revenue decline and losses due to the pandemic, its net debt-to-equity ratio remained at a strong 2.34x as of end- September last year.

The Development Bank of the Philippines (DBP) and Land Bank of the Philippines have joined hands with Asia United Bank Corp., Bank of the Philippine Islands, Metropolitan Bank & Trust Co. and Union Bank of the Philippines as lenders in the facility.

“We view this facility as a collective effort between the government and the private sector in assisting a strategic industry that plays a pivotal role in our country’s economic recovery from this pandemic. As the country’s infrastructure bank, DBP remains at the forefront of supporting the transport and logistics sector which ensures essential movement of people, goods and services across our archipelago,” DBP president and CEO Emmanuel Herbosa said.

Landbank president and CEO Cecilia Borromeo, for his part, said the financial institution fully supports the recovery of the aviation industry in the new normal.

“This forms part of our continuing commitment to respond to the financial requirements of key sectors and contribute to revitalizing our local economy,” Borromeo said.

BPI Capital Corp. acted as the mandated lead arranger and bookrunner for the transaction.

“The transaction serves as a good example of the banks’ preparedness to assist leading and strong institutions heavily impacted by the pandemic. We understand how vital the survival of the airline is to our economy,” BPI president and CEO Cezar Consing said.

CEBU AIR
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