Singapore Airlines is tapping existing investors for up to $S15 billion ($US10.48 billion) through the sale of shares and convertible bonds to offset the shock to its business from the coronavirus outbreak.
On top of that, the company has arranged a $S4 billion bridging loan with DBS Bank to support the company’s near-term liquidity requirements and until the funds come in from the more formal capital raising.
The rights issue will be offered at $S3 per share, a huge 53.8% discount to SIA’s last traded price of $S6.5 and a sign of the airline’s desperate need for cash.
The airline said it would issue $S5.3 billion in new shares to current shareholders and also issue 10-year bonds to raise up to a further $S9.7 billion.
The fundraising raises doubts about with Singapore, which owns 23.11% of Virgin Australia, will be in a position to help recapitalise the airline like Qantas did this week with a $A1 billion-plus loan.
Singapore’s need for cash immediately was underlined by the DBS loan. It would be doubtful if some of that money could be used to inject new money into Virgin right now.
The SIA fundraising is being underwritten by the airline’s biggest investor, state-owned Temasek Holdings [TEM.UL], which owns about 55% of the group. It will probably lift its stake given that many other investors are cash strapped at this time.
It’s a huge raising, given that the current US bailout bill before congress will provide $US58 billion for US airlines. The Singapore Air raising will by around 20% of that very large figure.
SIA’s shares went into a rare trading halt earlier in the day after plunging to their lowest in 22 years as investors feared the pandemic will have a deep impact on the company.
SIA has said it will cut capacity by 96%, ground almost its entire fleet and impose cost cuts affecting about 10,000 staff in what it called the “greatest challenge” it had ever faced.
Qantas earlier this week raised $1.050 billion via a 10-year loan at 2.75% secured over a number of 787 jets that it bought for cash a few years ago.