The Philippines’ flag carrier Philippine Airlines ( PAL ) on July 8 announced the pricing of its inaugural fixed-rate guaranteed bond offering amounting to US$300 million – marking a new chapter in the company’s transformation and long-term growth journey.

The five-year deal was issued through its wholly-owned subsidiary Primero Aguila at a coupon of 7.75% and guaranteed by Philippine Airlines, Inc. and Air Philippines Corporation.

The deal attracted strong interest from a diversified global investor base, generating a final order book of more than US$1.4 billion, representing an oversubscription of approximately 4.5 times. The enthusiastic response demonstrates the global investor confidence in PAL’s operational and financial turnaround following its restructuring and reinforces the airline’s continued momentum as it enters its next phase of growth.

The transaction also represents several significant achievements for both PAL and the Philippine capital markets. It is 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-ever rated airline bond issuance from South and Southeast Asia. Collectively, these achievements reflect PAL's strengthened financial standing, growing confidence among global investors and successful transformation into an airline with direct access to the international capital markets.

PAL Holdings president Lucio C. Tan III says in a statement the pricing of the transaction reflects how far PAL has come in recent years. “This landmark bond offering is a powerful affirmation of PAL’s transformation and the confidence that global investors have in our long-term vision and growth ambitions,” he points out. “This allows us to strengthen our network and continue to elevate the travel experience for our customers. It reinforces PAL’s role in promoting tourism, trade, investment and economic growth for the Philippines."

PAL operates scheduled non-stop flights from its hubs in Manila and Cebu to 29 destinations across the Philippines and 40 destinations in Asia, North America, Australia and the Middle East.

The transaction builds on a series of significant milestones achieved by PAL over the past two years, including sustained profitability, continued fleet modernization, expansion of its international network, industry-leading operational reliability and the achievement of international credit ratings from both Moody's and Fitch Ratings.

Moody’s assigned a Ba2 rating to the bond, reflecting PAL’s position as the Philippines’ national flag carrier with steady domestic and international market shares and a defensible long-haul franchise. The rating also incorporates the company’s strengthened financial metrics and improved cost and capital structure following its Chapter 11 restructuring in 2021.

PAL intends to use the bond proceeds for general corporate purposes, including funding of the interest reserve account, refinancing of existing offshore indebtedness and capital expenditures. Deutsche Bank acted as the sole global coordinator and rating adviser for the deal as well as a joint bookrunner along with BNP Paribas.