The board of Cebu Air Inc., the country’s second-largest airline led by the Gokongwei Group, has approved the company’s plan to raise as much as $500 million through the issuance of convertible preferred shares and convertible bond private placement.
The company, which operates Cebu Pacific airline, said it will issue the convertible preferred share that will it conduct through stock rights offer, which will be used to transform its business felled by the Covid-19 pandemic.
It expects proceeds of some $250 million from the stock rights offer, a measure that allows a shareholder to buy preferred shares depending on the amount of shares that he holds.
There will also be a private placement of convertible bonds with an aggregate subscription price of up to $250 million.
The board will seek shareholders’ approval to amend its articles of incorporation to increase its authorized capital stock to P1.74 billion from P1.34 billion and create a new class of convertible preferred shares with a par value of P1 per share.
“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 company said.
“Due to this exceptional change in market conditions and industry dynamics, the corporation saw the urgent need to fast-track its transformation.”
The airline said it is currently implementing a business transformation exercise that involves the right-sizing of network and fleet to meet new demand, and improvement of operations efficiency through process and policy enhancements and digitalization.
“This places the corporation in a better position to respond to this harsh reality.”
The determination of the final terms and conditions of the convertible preferred shares rights issue and the convertible bonds private placement has been delegated to the board of directors.
The conversion price of the preferred shares and bonds is expected to be the same and to be set within theP38 to P45 range, representing a conversion premium of 2 percent to 21 percent over the company’s 30-day volume weighted average price from August 26 to October 7.
“The corporation would also like to highlight that the proposed convertible preferred shares rights issue and convertible bonds private placement would be fair, transparent and equitable to all shareholders. All relevant approvals will be sought from, and appropriate disclosures would be made to, the Securities and Exchange Commission and the Philippine Stock Exchange,” it said.
Image credits: Nonie Reyes
