Cebu Pacific Air (5J, Manila Ninoy Aquino International) has secured a PHP16 billion peso (USD206 million) 10-year loan from a syndicate of domestic banks in what is being punted as a sign of confidence in the carrier and the recovery of the Philippine economy.
The loan also coincides with the launch of the Philippines’ COVID-19 vaccination programme, which, it is hoped, will restore passenger confidence in flying.
The low-cost carrier in a statement said it would use the proceeds of the loan to fund its capital expenditures and for other general corporate purposes. The loan would also provide a cushion against unexpected working capital requirements that may arise from fuel price and foreign exchange rate volatility.
The loan is being forwarded by both government-owned financial institutions and private-sector lenders, including the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), the Asia United Bank Corporation (AUB), Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Company (MBTC), and Union Bank of the Philippines (UBP).
Cebu Pacific President and Chief Executive Officer Lance Gokongwei called it a “landmark deal”, adding the airline remained focused on its business transformation to reduce its unit cost.
The airline sustained severe revenue decline and losses due to the COVID-19 pandemic, but its “debt-to-equity ratio was still at a strong 2.34x as of September 30, 2020”, the company said. “The strong balance sheet and liquidity, with which the company entered 2020, has supported it in this challenging environment.”
The loan follows Cebu Pacific’s PHP12.5 billion (USD257 million) preferred share stock rights offering for convertible preferred shares which began on March 3, 2021. Its principal shareholder, CPAir Holdings, undertook to subscribe its pro-rata share and any remaining unsubscribed rights in the offer.
The syndicated loan facility, together with the Offer, would further strengthen the carrier’s balance sheet and liquidity position, the company said.
