CEBU Air Inc., the listed operator of Cebu Pacific, has obtained approval from stockholders for its plan to issue convertible preferred shares and bonds, as it seeks to raise $500 million (about P24.13 billion) to survive the Covid-19 pandemic.
In a meeting with stockholders on Friday, Nov. 20, 2020, the Gokongwei-led company said stockholders representing 87.36 percent of its total outstanding capital stock approved its previously disclosed fundraising plans.
The stockholders approved the plan to increase the company’s authorized capital stock to P1.75 billion from P1.34 billion at present, from which it will create a new class of convertible preferred shares.
These shares will be offered for sale through a stock rights offering, which should generate about $250 million (about P12.07 billion) for the company. The underlying common shares of the convertible preferred shares will then be listed at the Philippine Stock Exchange (PSE).
The stockholders also gave the go-signal for the issuance of convertible bonds, warrants, bonds with detachable warrants and other similar securities, whose underlying common shares will likewise be listed on the PSE.
The measures are part of Cebu Pacific’s “Business Transformation Fundraising Plan,” which the company crafted to strengthen its balance sheet amid the crisis.
When the company first announced this plan in October, Cebu Air said it has been struggling to cope as passenger traffic plunged due to travel restrictions.
“The airline industry faces significant challenges as a result of unprecedented events outside the control of the corporation brought by the Covid-19 pandemic. Travel restrictions imposed by various governments, both local and abroad, have led to abrupt reduction in passenger traffic for the corporation and casts uncertainty over the near term prospects of the Corporation despite its market leadership,” the firm had said.
As of end September, Cebu Pacific’s net loss had reached P14.69 billion, reversing last year’s profits of P6.77 billion. Revenues slumped 70 percent to P19.34 billion, as air passenger traffic dropped 72 percent to 4.7 million.
Shares in the company closed at P49.70 each on Friday, up 15 centavos or 0.30% from the previous close. (CSL)