Singapore Airlines is planning to issue S$5.3 billion ($3.7 billion) in equity and S$3.5 billion in 10-year mandatory convertible bonds in order to raise liquidity as demand for air travel slumps globally.
The company will raise an initial tranche of S$3.5 billion via the convertible bond, with the option to issue S$6.2 billion through additional tranches over subsequent months.
“SIA’s largest shareholder Temasek Holdings will vote in favour of the resolutions and procure a subscription for its full entitlement and the remaining balance of both issuances,” the company states 26 March.
Both rights issuances are subject to shareholder approval, which is expected to be “held in due course”.
In addition to the equity and convertible offering, the company has also signed for a S$4 billion bridge loan with DBS Bank in order to support the company’s “near-term liquidity requirements”.
“This is an exceptional time for the SIA Group,” Singapore chairman Peter Seah states 26 March. “Since the onset of the Covid-19 outbreak, passenger demand has fallen precipitously amid an unprecedented closure of borders worldwide. We moved quickly to cut capacity and implement cost-cutting measures.”
On 23 March the group said it would slash 96% of scheduled capacity and ground almost all aircraft, as the coronavirus presented “the greatest challenge that the SIA Group has faced in its existence”.
Two days later, the airline confirmed to Cirium that pilots with the mainline carrier and SilkAir would take unpaid leave for up to seven days, “until the business recovers”.
Hours before SIA’s latest disclosure, Singapore made a supplementary budget announcement regarding a second stimulus package to tackle the economic impact of the coronavirus crisis.
Deputy prime minister Heng Swee Keat said that Singapore’s Changi air hub was “an important pillar of our economy”, and along with adjacent industries, contributed over 5% of the country’s GDP and employs about 192,000 people.
“Governments around the world are taking steps to support their airlines,” he added, and cited the example of the USA providing support to its airlines and aerospace manufacturers.
Without going into details, he stated: “SIA is considering a corporate action supported by Temasek Holdings”.
He added: “The SIA Group sits at the heart of our aviation ecosystem. Many foreign airlines choose to come to Changi because they can tap on SIA’s connectivity to the rest of the region.
“A diminished SIA will diminish our air hub’s ability to recover from the crisis.”
He said the measures will “make sure that SIA is able to come through this in good shape”.
“This is about preserving the status of our air hub so that it can emerge stronger from this crisis.”
According to SIA’s latest annual report for the fiscal year ending 31 March 2019, its issued bonds have a collective face value of S$4.38 billion and mature between July 2020 and August 2027.
At period end, it had a S$1.9 billion net working capital deficit while cash and cash equivalents stood at S$2.9 billion.
For the quarter ending 31 December 2019, the group posted a 15.7% increase in operating profit to S$449 million, on the back of strong growth in the passenger business and despite declining cargo earnings.