Philippine Airlines has successfully priced its inaugural $300-million international bond offering, with more than $1.4 billion in investor orders pouring in, representing 4.5 times the amount offered.
The fixed-rate five-year senior notes were priced at a 7.75% coupon on July 7, and will be unconditionally and irrevocably guaranteed by Philippine Airlines and Air Philippines Corp.
The notes are expected to settle on July 16, subject to customary closing conditions, and will be listed on the Singapore Exchange Securities Trading Ltd.
The airline's head of sales trading at Globalinks Securities and Stocks, Inc. said the successful pricing demonstrates the airline's ability to access international debt capital markets after rebuilding its balance sheet following the pandemic.
The successful bond offering is a significant milestone for the airline, as it allows the company to access the global debt capital markets after years of rebuilding its balance sheet following the pandemic.
The demand for the issuance was likely driven by high-yield and emerging-market credit investors seeking attractive returns, according to the company's statement.
The airline's financial flexibility, operating efficiency, and fleet expansion strategy were cited as factors in Fitch Ratings' assignment of a BB issuer default rating with a stable outlook in June.
Philippine Airlines' President Lucio C. Tan III said the transaction will allow the airline to strengthen its network and enhance the travel experience for customers.
The airline's President Richard Nuttall described the transaction as a milestone for the airline, saying it marks a defining moment in the company's ongoing transformation.
The bond offering marks the first rated high-yield bond offering by a Philippine issuer in more than a decade, the first unsecured rated high-yield bond issued by an Asian airline, and the first rated airline bond issuance from South and Southeast Asia.
The airline is continuing to expand its international network and modernize its fleet, with plans to increase flight frequencies to Japan and Australia ahead of the winter and year-end travel seasons.
The carrier is also expecting the delivery of about five Airbus A350-1000 aircraft this year and is refurbishing 18 Airbus A321ceo aircraft as part of its fleet modernization program.
However, 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 remains exposed to exchange rate movements and geopolitical risks.
