PAL’s $300-M bond draws $1.4B in orders

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 more than $1.4 billion (P86.11 billion) in investor orders, about 4.5 times the amount offered.

In a statement, 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 will be unconditionally and irrevocably guaranteed by Philippine Airlines and Air Philippines Corp., are expected to settle on July 16, subject to customary closing conditions, and will 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 significant milestone because it demonstrates the airline’s ability to access the global 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 seeking attractive returns.

“From a credit perspective, the issuance is unlikely to result in an immediate ratings upgrade on its own, but 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 Ratings assigned Philippine Airlines a BB issuer default rating with a stable outlook, citing the flag carrier’s position in 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 customers.

“This landmark bond offering is a powerful affirmation of Philippine Airlines’ transformation and the confidence that global investors have in our long-term vision and growth ambitions. This allows us to strengthen our network and continue to elevate 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 statement.

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 are 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 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 bond offering comes as PAL continues to expand its international network and modernize its fleet.

On Tuesday, the airline announced 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.

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 remains exposed to exchange rate movements and geopolitical risks.