Cebu Pacific signs P16-B loan deal with local banks to fund pandemic-hit operations

Gokongwei-led budget carrier Cebu Pacific said Friday it has signed a P16-billion loan deal with several domestic banks as it looks for various funding sources to finance its operations, which was adversely affected by the COVID-19 pandemic.

In a disclosure to the Philippine Stock Exchange, Cebu Air Inc., the operator of Cebu Pacific, said it signed a 10-year term loan facility with state-run Development Bank of the Philippines (DBP) and Land Bank of the Philippines.

Private banks Asia United Bank Corporation (AUB), Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Company, and Union Bank of the Philippines (“UBP”) also joined as lenders in the P16-billion term loan facility.

“This syndicated loan facility is a landmark deal that exhibits the strong partnership between government financial institutions and private domestic banks to support Cebu Pacific, who along with the entire airline industry, have been severely impacted by the COVID pandemic,” the airline said.

“This term loan facility which was equally participated in by government financial institutions and leading private sector domestic banks, further represents the confidence of these institutions in the recovery of the Philippine economy and the belief that Cebu Pacific will continue to play a leading and vital role in this economic recovery,” it said.

Cebu Pacific said it will use the proceeds of the loan to fund its capital expenditures and 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.

The airline currently operates at only about 23% of its pre-pandemic network with 32 domestic destinations, Cebu Air vice president for Marketing and Customer Service Candice Iyog said earlier.

Iyog said the carrier operates only half of its 73 aircraft since some were sent to Australia for “indefinite storage” amid the COVID-19 crisis.

The loan facility with various banks is on top of the airline’s P12.5-billion fundraising plan through the issuance of convertible preferred shares.

The syndicated loan facility, together with the shares offering are seen to further strengthen Cebu Pacific’s balance sheet and liquidity position and is a prime example on how the government, private sector and sponsor can work together in contributing to a resurgent Philippines.

BPI Capital Corporation acted as the mandated lead arranger and bookrunner for the transaction.

Moreover, DBP and Landbank acted as mandated lead arrangers, AUB as lead arranger and Metrobank and Union Bank as arrangers for the syndicated loan facility.

AUB-Trust and Investments Group was appointed as the facility agent. — RSJ, GMA News