Domestic tranche of Cebu Air IPO oversubscribed

MANILA, Philippines - The domestic portion of Cebu Air’s initial public offering (IPO), amounting to P7 billion, has been oversubscribed prior to the end of the offering period, according to lead domestic underwriter ATR KimEng Capital Partners Inc.

In its report, ATR KimEng said Philippine Stock Exchange (PSE) trading participants have committed to take up 96 percent of their allocation, or 37.327 million Cebu Air common shares valued at P4.67 billion but with additional orders from other investors, the balance of the brokers’ allocation has now been fully sold.

It added that as far as the Small Investors Program (SIP) is concerned, there are takers for the shares that will remain unsold from the 10 percent allocated for the SIP. The offer to small investors remains open until 11 a.m. Monday, Oct. 18. Small shareholders can subscribe to up to P25,000 worth of Cebu Air shares and and can submit their applications to ATR KimEng or BDO Stock Transfer Department.

The domestic offering followed a successful international tranche, amounting to P16.4 billion, which was more than twice oversubscribed by institutional investors overseas.

The maiden share sale of Cebu Air, the company behind the Cebu Pacific airline brand, is the largest Philippine IPO in dollar terms and one of the largest ever conducted in the country. The budget airline is expecting to raise P23.3 billion (excluding the greenshoe option) through the share issuance.

Of the estimated total proceeds, P19.496 billion will go to parent firm CPAirHoldings while P4.139 billion will be channeled to Cebu Air to support its massive reflecting program.

Proceeds from the IPO will be used to fund Cebu Air’s expansion plans through the acquisition of new planes. It currently has a fleet of 29 planes.

The airline has budgeted $1.4 billion for the purchase of 22 brand-new Airbus aircraft scheduled for delivery this year until 2014.Three Airbus A320s will be delivered in the last quarter of the year; another three will be delivered starting June towards the end of the second half of 2011; four units by 2012 ; seven by 2013; and five by 2014.

Cebu Air, which now carries more passengers than larger rival Philippine Airlines, posted a net profit of $$68.4 million in the first half this year.