Cebu Air secures $250 million in fresh capital

MANILA, Philippines — Cebu Air Inc., the operator of budget carrier Cebu Pacific, has secured $250 million in fresh capital from a group of investors.

Cebu Air said it signed last week an agreement to receive $250 million in the form of convertible bonds with the International Finance Corp. (IFC), the IFC Emerging Asia Fund and Indigo Philippines LLC, an affiliate of Indigo Partners LLC.

The IFC, a sister organization of the World Bank and member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.

The IFC Emerging Asia Fund, on the other hand, is a $693 million private equity fund managed by the IFC Asset Management Co.

Indigo Partners LLC, meanwhile, is a US-based private equity firm that specializes in investing in the aviation sector.

Its current airline investments include Frontier Airlines (US), Volaris (Mexico), Wizz Air (EU), and JetSMART (Chile).

The investment has secured approval from Cebu Air’s board of directors at a special meeting last week.

The number of underlying shares for the convertible bonds is 318.75 million common shares with P38 conversion price.

Given the mounting losses due to the pandemic, Cebu Air last year announced plans to raise up to $500 million in fresh capital which involves the issuance of up to $250 million in new convertible preferred shares, as well as another $250 million in privately placed convertible bonds.

Prior to this new investment in the form of convertible bonds, Cebu Air was able to raise P28.5 billion in fresh capital, giving it a cash runway to survive and continue operations this year amid the continuing challenges brought about by the pandemic.

The company’s convertible preferred shares were successfully listed on the Philippine Stock Exchange on March 29.

It also signed on March 5 a P16 billion, 10-year term loan facility with a syndicate of domestic banks.