Singapore Airlines is shoring up its defenses against the devastating impact of COVID-19 with an offer to shareholders of up to $S15 billion ($US10.5 billion) in new equity and convertible bonds.
The company will offer all shareholders $S5.3 billion in new equity and up to a further $S9.7 billion through an issue of 10-year mandatory convertible bonds. Mandatory convertible bonds require the holder to convert the bonds into shares at a given date.
Both will be offered as a rights issue offering a significant discount of more than 50 percent on the airline’s last traded share price.
Singapore (SIA) has also arranged a $S4 billion bridge facility with DBS bank to support its near-term liquidity requirements.
The rights issuances are subject to shareholder approval but are being backed by the airline’s biggest shareholder, state-owned Temasek Holdings.
Temasek International chief executive Dilhan Pillay said SIA had seen strong future growth before the hit from the pandemic.
“We fully support SIA’s plans to transform itself,’’ he said.
“This includes the modernization of its fleet. The delivery of a new generation aircraft over the next few years will provide better fuel efficiencies as well as meet its capacity expansion strategy.”
“The aviation sector is a key pillar of Singapore’s economy, supporting more than 12 percent of the country’s GDP and 375,000 jobs.
“The group is at the heart of the aviation ecosystem, with SIA, SilkAir and Scoot accounting for more than half of the passengers flying in and out of Changi Airport.”
SIA has described COVID-19 as the biggest challenge in its history and has joined other international carriers in taking dramatic action in response.
This included grounding 96 percent of its fleet and asking staff, including pilots, to take leave without pay.
“Since the onset of the Covid-19 outbreak, passenger demand has fallen precipitously amid an unprecedented closure of borders worldwide,’’ SIA chairman Peter Seah said.
“We moved quickly to cut capacity and implement cost-cutting measures. “
Seah said he was heartened by the strong support from staff and noted the company had worked closely with the government to bring Singaporeans home.
“At the same time, we are also working with various parties to enable our staff on no-pay leave to have other income opportunities,’’ he said.
“We are especially grateful for Temasek’s strong vote of confidence. The Board is confident that this package of new funding will ensure that SIA is equipped with the resources to overcome the current challenges, and be in a position of strength to grow and reinforce our leadership in the aviation sector.”