By Ashley Erika O. Jose, Reporter
PHILIPPINE AIRLINES (PAL) announced on Wednesday that it had priced its inaugural $300-million (P18.45-billion) international bond offering after receiving greater than $1.4 billion (P86.11 billion) in investor orders, about 4.5 times the quantity offered.
In a press release, PAL Holdings, Inc., the listed parent of Philippine Airlines, Inc., said its wholly owned subsidiary Primero Agila Ltd. priced the fixed-rate five-year senior notes at a 7.75% coupon on July 7.
The notes, which shall be unconditionally and irrevocably guaranteed by Philippine Airlines and Air Philippines Corp., are expected to choose July 16, subject to customary closing conditions, and shall be listed on the Singapore Exchange Securities Trading Ltd.
Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said the successful pricing demonstrated the airline’s ability to access international debt capital markets after rebuilding its balance sheet following the pandemic.
“PAL’s successful pricing of its inaugural $300-million international bond is a big milestone since it demonstrates the airline’s ability to access the worldwide debt capital markets after years of rebuilding its balance sheet following the pandemic,” he said in a Viber message.
Mr. Arce said demand for the issuance was likely driven by high-yield and emerging-market credit investors looking for attractive returns.
“From a credit perspective, the issuance is unlikely to lead to a right away rankings upgrade by itself, however it could support a more stable or positive rating outlook if the proceeds strengthen PAL’s liquidity profile and improve its debt maturity schedule,” he said.
In June, Fitch Rankings assigned Philippine Airlines a BB issuer default rating with a stable outlook, citing the flag carrier’s position within the Philippine aviation market, diversified route network, financial flexibility, operating efficiency, and fleet expansion strategy.
PAL Holdings President Lucio C. Tan III said the transaction would allow the airline to strengthen its network and enhance the travel experience for purchasers.
“This landmark bond offering is a strong affirmation of Philippine Airlines’ transformation and the arrogance that global investors have in our long-term vision and growth ambitions. This enables us to strengthen our network and proceed to raise the travel experience for our customers. It reinforces Philippine Airlines’ role in promoting tourism, trade, investment and economic growth for the Philippines,” he said in a press release.
Philippine Airlines President Richard Nuttall described the transaction as a milestone for the airline.
“This inaugural international bond offering marks a defining milestone in Philippine Airlines’ ongoing transformation. We’re grateful for the overwhelming support we received from investors globally, which we see as a vote of confidence in PAL’s long-term strategy, market position and growth outlook,” he said.
PAL said the transaction marked the primary rated high-yield bond offering by a Philippine issuer in greater than a decade, the primary unsecured rated high-yield bond issued by an Asian airline, and the primary rated airline bond issuance from South and Southeast Asia.
The bond offering comes as PAL continues to expand its international network and modernize its fleet.
On Tuesday, the airline announced plans to extend flight frequencies to Japan and Australia ahead of the winter and year-end travel seasons.
The carrier can also be expecting the delivery of about five Airbus A350-1000 aircraft this yr and is refurbishing 18 Airbus A321ceo aircraft as a part of its fleet modernization program.
Mr. Arce said investors should remain mindful that the issuance increases the airline’s fixed financial obligations at a time of elevated borrowing costs, while the aviation industry stays exposed to exchange rate movements and geopolitical risks.