MANILA -- The Philippines' largest budget carrier Cebu Air on Thursday said it is looking to raise $500 million to repair a balance sheet that has been hit by the coronavirus pandemic.
The move comes a day after the Philippine government hinted it could offer airlines some assistance while also making it clear that the private sector would have to lead the industry's revival.
Cebu Air told the stock exchange that the fresh capital will be raised through convertible preferred share issuance and a private placement. "Due to this exceptional change in market conditions and industry dynamics, the corporation saw the urgent need to fast track its transformation," the company said.
The convertible bonds are expected to be priced between 38 and 45 pesos, it said. Shares of Cebu Air stood at 37.10 pesos apiece on Wednesday, giving it a market capitalization of around 22.3 billion pesos ($460 million).
The day before the announcement, Philippine Finance Secretary Carlos Dominguez said the government could aid the ailing aviation industry, but stressed that the private sector must do the heavy lifting.
"Let me point out that whatever assistance we have or we are going to provide will be only part of the entire process," Dominguez said during a business forum on Wednesday. "The private sector banks have to cough up the majority of the assistance."
Cebu Air, which laid off 800 staff in August, said the fundraising is part of a wider business transformation program that involves "right-sizing" its network and fleet to meet new demand and improving efficiency through digitization.
"This places the corporation in a better position to respond to this harsh reality," said the company, which is controlled by JG Summit Holdings, part of the Gokongwei Group.
Cebu Air said revenues in the first half, which saw the Philippines impose one of the world's longest and toughest lockdowns, fell 61.2% to 17.3 billion pesos while it swung to a 9.14 billion peso net loss from a 7.14 billion peso profit a year ago.
Its larger peer Philippine Airlines has also struggled. The company has received billions of pesos in capital injection from its controlling shareholder, billionaire Lucio Tan, to keep the company afloat. Last week, the country's largest airline started a major layoff process covering around 2,700 staff, or around 35% of its workforce.
Philippine Airlines said it was operating only 15% of its flights and the job-cutting program was necessary for its survival.