Qantas Airways has raised AU $ 1.05 billion (US $ 633 million) to strengthen its balance sheet, one of the first successful debt collection by an airline since countries around the world began to close their borders against the coronavirus, forcing the industry to immobilize thousands of planes.
The 10-year loan from a consortium of national and international banks is guaranteed against part of the Australian carrier’s fleet at an interest rate of 2.75%. He intervenes amid warnings from the global airline industry that almost half of the world’s carriers are at risk of bankruptcy due to the coronavirus crisis.
“Investors are asking that Qantas have enough cash to weather the crisis,” said Blake Henricks, portfolio manager at Firetail Investments, which owns Qantas shares. “They got a lower interest rate than your typical home loan at a time when much of the airline industry is not investable. This reflects Qantas’ strong position in the domestic market. “
Qantas shares closed up 20% on ASX on Wednesday, which gained 5.5%.
As global airlines strive to cut costs and governments prepare bailouts, industry trade body Iata warned on Tuesday that the coronavirus pandemic would reduce airline revenues by $ 250 billion. dollars this year.
Credit markets tightened and rating agencies began to downgrade airlines. S&P reduced Delta Airlines debt to the trash on Tuesday, while last week Moody’s placed Qantas’ Baa2 credit rating under review for possible downgrade.
Qantas maintained that he had enough cash to get out of the crisis and that he would not need a government bailout.
“Everything we do right now is focused on ensuring the long-term future of the national carrier, including making sure our employees have jobs to return to when we work for them again,” said Alan. Joyce, general manager of Qantas.
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The airline has a net debt of AU $ 5.1 billion and no major maturities until June 2021. Additional funding of AU $ 1.05 billion, which contains no financial covenants, increases Qantas’ cash balance to 2.95 billion Australian dollars, with an additional unused facility of 1 billion Australian dollars. remains available.
Unlike many global airlines, Qantas has purchased at least half of its planes, which means it has an additional AU $ 3.5 billion in unencumbered assets.
Analysts said the low interest rate on the raised AU $ 1.05 billion debt was a vote of confidence in the airline’s ability to survive. On the other hand, the New Zealand government advanced to Air New Zealand last week a loan facility of 900 million New Zealand dollars at interest rates between 7 and 9%.
“We expect Qantas to weather the storm anyway, but it certainly offers an additional margin,” said Angus Hewitt, analyst at Morningstar. “We don’t expect the company to be forced to raise capital.”
Chris Wyke, deputy managing director of Moelis Australia, described Qantas’ debt relief as positive, adding: “It is good to see confidence in quality companies emerging on the other side of the pandemic.”
Additional reporting by Peggy Hollinger