China Southern Airlines plans to raise up to 10.75 billion yuan ($1.6 billion) from a non-public shares issue to its parent company and other investors.
It will use the funds to boost its working capital and pay off debts, says the Guangzhou-based carrier.
China Southern will issue around 1.77 billion mainland-listed A shares to 10 investors at not less than 5.66 yuan per share. These include its parent company China Southern Air Holding Company (CSAHC), which will use a capital injection of 1.5 billion yuan from the Chinese government to purchase the shares.
The SkyTeam carrier will also issue not more than 312.5 million Hong Kong-listed H shares to Nan Lung, a wholly-owned subsidiary of CSAHC, at not less than HK$2.73 ($0.35) per share.
"This exercise will help reduce the company's gearing ratio, improve its capital structure and enhance its ability to mitigate risk," says the carrier.
"Given the current financial condition of the group, the directors believe that taking up further borrowings or other bank financing would increase the group's finance costs, and, in turn, will further deteriorate the group's financial position."
China Southern plans to use the proceeds from the shares issue to pay off more than $2 billion in debt, it adds. Any remaining funds will be used as working capital, says the airline.
The carrier, which suspended trading of its H shares from 23 February, has applied to resume trading from today.