Cebu Air Inc. (CEB), operator of low-cost carrier Cebu Pacific, which signed a P16-billion loan with domestic banks last Fridaym sees this a landmark deal that signifies confidence of the banking community towards the carrier.
Lance Gokongwei, CEB president and chief executive officer said the carrier remains focused on its business transformation to reduce its unit cost so as to continue to offer affordable flights and “remain as our country’s airline for every Juan.”
CEB signed a term loan facility with Development Bank of the Philippines and Land Bank of the Philippines which joined hands with Asia United Bank Corp., Bank of the Philippine Islands, Metropolitan Bank & Trust Company and Union Bank of the Philippines as lenders in the facility.
CEB will use the loan proceeds to fund its capital expenditures and for other general corporate purposes. The loan will also provide a cushion against unexpected working capital requirements that may stem from fuel price and foreign exchange rate volatility.
The airline said while it sustained severe revenue decline and losses due to the pandemic, its net debt-to-equity ratio was still at a strong 2.34x as of end-September 2020.
The strong balance sheet and liquidity, with which the company entered 2020, has supported it in this challenging environment, CEB added.
For Candice Iyog, CEB vice president for marketing and customer experience, there is no single solution for its recapitalization effort.
“There’s really multiple solutions,” added Iyog, referring to the downsizing its workforce by 30 percent last year, fund raising and government aid, among others.
“We look at the future, knowing what we have for the network, how much cash we need and how long the economy will recover…all of the cash raising, Bayanihan (government aid), it’s actually a lot of effort,” Iyog said.
At present, CEB is operating 23 percent of its pre-coronavirus pandemic level and is targeting to increase this to 30 percent this year.
Last month, CEB set the final terms of its P12.5-billion convertible preferred share stock rights offering in which its principal shareholder CPAir Holdings Inc., a JG Summit company, expressed its full support by undertaking to subscribe its pro-rata share and any remaining unsubscribed rights in the offer.