Cebu Air Inc., the operator of budget airline Cebu Pacific, has set a P38 per entitlement right price for its P12.5-billion convertible preferred shares, which will be sold via rights offering.
The said price was a deep discount from its P50.10 per share closing price on Wednesday.
As a result, the company is offering 328.94 million convertible preferred shares, which are cumulative, non-voting, nonparticipating, with a par value of P1.00 per share.
The said number of shares will be new shares that the company will create, which will come from the increased authorized capital stock.
The offer is open to shareholders of record as of February 26. A notice of the offer and entitlement rights will be available to eligible shareholders.
CPAir Holdings Inc., which beneficially owned 66.77 percent of Cebu Air’s common shares, has expressed its full support for the company’s proposed offer, the company said. It said that it will subscribe to its entitlement rights, including those unsubscribed rights to ensure that all the rights covered by the offer are fully subscribed.
The company earlier has re-dominated its offer from US dollars to Philippine peso to allow wider participation from all potential eligible shareholders, particularly the retail shareholders.
A stock rights offer (SRO) is a measure that allows a shareholder to buy the preferred shares, or those type that do not have voting rights but has more dividend pay, depending on the amount of shares that he holds.
Proceeds of the offer will be used to transform its business felled by the Covid-19 pandemic.
Some P4.8 billion will be allocated for repayment of an advance by JG Summit Philippines Ltd., P3.91 billion for aircraft operating lease payments due in 2021, P3.32 billion for principal debt repayments due in 2021 and P0.384 billion will be for general corporate purposes, which are primarily for passenger refunds in case cash inflows from operations become insufficient as a consequence of the Covid-19 pandemic’s impact to health and travel related concerns.
The offer period is scheduled on March 3 through March 9 and will be listed at the Philippine Stock Exchange on March 29.
“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.”