Cebu Pacific Air (5J, Manila Ninoy Aquino International) will acquire an additional 20% stake in 1Aviation Ground Handling Services (1AV) in a debt-to-equity deal, according to an October 29 stock market filing. The transaction will increase Cebu’s ownership in 1AV from 40% to 60%. The airline will forego debts of PHP113 million pesos (USD1.94 million) for the additional stake.
Cebu Air said loans of PHP150 million (USD2.57 million) were being converted into equity, of which Cebu Air’s share is PHP113 million. Other creditors participating include Philippine Airport Ground Support Solutions Inc. (PAGSS) and Jefferson G Cheng, converting outstanding loans of PHP34.2 million (USD586,485) and PHP2.8 million (USD480,163), respectively. PAGSS and Cheng own the remaining 40% of 1AV.
1AV is one of the country's major ground handling services providers, present in 34 airports across the Philippines and employing 6,224 people. Aside from Cebu Pacific, its customers include Sunlight Air (2R, Manila Ninoy Aquino International) and PAGSS, which, among other things, look after ground handling at Manila's Ninoy Aquino Airport.
"The debt-to-equity conversion will reduce 1AV's debt and improve its financial health," the filing reads. "At the same time, Cebu Pacific will increase its equity ownership in 1AV, strengthening its management influence to enable it to more effectively integrate 1AV's services with its operations, to reduce its operational costs while improving its service quality."
The deal follows Cebu Pacific recently buying a 100% stake in AirSWIFT (T6, Manila Ninoy Aquino International) for USD31 million.
The debt-to-equity deal remains subject to approval from the Philippines Securities and Exchange Commission.
