CEB’s retained earnings almost out, banks & stockholders keep it flying

Cebu Pacific (CEB) is experiencing turbulence in these times and there is no need to discuss why. CEB tallied a net loss of 22.2 Billion for the year 2020. The severe loss cut its retained earnings to just 14.7 Billion Pesos. Another horrible year could definitely wipe it out.

The losses from demand drop were exacerbated by a 2.25 Billion loss on fuel hedges. The significant drop in fuel prices in 2020 may have rendered their fuel hedges useless, thus, the significant loss on the hedges.

CEB ended 2020 with a cash of only 4.3 Billion from 18.2 Billion at the start of that year. It is facing payment of short-term and current debt of 9.6 Billion, and current lease of 6.8 Billion. Meanwhile in 2020 CEB was burning cash on operating activities at an average of 1.1 Billion Pesos a month. That scenario is more likely to continue in 2021.

But despite that gloomy outlook, CEB will keep flying. The parent company of CEB has tremendous relationships with banks and the broader financial market. Earlier in the year CEB made a convertible preferred share rights offering to its stockholders and was able to raise 12.5 Billion from the said rights offering. Aside from the rights offering, CEB also raised 16 Billion from a ten-year term loan facility from a syndicate of domestic banks. AUB, BPI, MBT and UBP together with government banks – Landbank and DBP are the lenders in the said facility.

With those fund raisings, CEB will keep flying.

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