State investor Temasek Holdings and others will inject up to $ 19 billion ($ 13.27 billion) in cash into Singapore Airlines (SIA) in the biggest rescue of an airline criticized by the coronavirus pandemic.
The massive financing plan, which dropped SIA shares to 10.5% on Friday, highlights the magnitude of the financial problems for the global airline industry, with nearly a third of the world’s planes already immobilized because of the pandemic, according to the data provider Cirium.
Many governments around the world have already stepped in to help airlines in the context of the travel crisis caused by the virus, with the United States providing $ 58 billion in aid. Many carriers have immobilized fleets and ordered thousands of workers on leave without pay to stay afloat.
Singapore Airlines’ fundraising shares of up to $ 5.3 billion and up to $ 9.7 billion in convertible tickets are subscribed by Temasek, which owns about 55% of the group.
The carrier also obtained a $ 4 billion bridge loan facility from the country’s largest lender, DBS Group Holdings Ltd, to meet short-term liquidity needs.
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“This is an exceptional time for the SIA group,” said SIA President Peter Seah on Thursday.
SIA shares had a rare trading halt earlier Thursday after plunging to their lowest level in 22 years this week, as investors feared the virus would have a profound impact on the company.
“In the current dire circumstances, the rights issue is the best tactical decision for SIA. It underscores the strategic importance of the carrier for Singapore and the position of the island state as both a financial center and an aviation hub “said Shukor Yusof, director of aviation consulting Endau Analytics. said in a blog post.
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The SIA said it would reduce capacity by 96%, anchor almost all of its fleet and impose cost reductions affecting approximately 10,000 employees amid what it called the “biggest challenge” it never faced.
The rights offering will be offered at a price of $ 3 per share, representing a 53.8% discount on the last negotiated price of SIA of $ 6.5.
“While the rise seems decisive for profits and valuation, SIA now seems well positioned to weather the storm with largely decomposed balance sheet problems,” BofA analysts told their clients.
Temasek International chief executive Dilhan Pillay Sandrasegara said the deal would not only push the SIA onto a short-term liquidity challenge, but would position it for growth beyond the pandemic.
The SIA has stated that it will use the funding of rights issues to strengthen its capital and operational expenditure needs.
On Thursday, the Singapore government announced more than $ 30 billion in new measures to help businesses and households prepare for the pandemic.
Finance Minister Heng Swee Keat also said that SIA would announce support for Temasek and that he welcomed Temasek’s decision to support the airline.
Qantas Airways has secured 1.05 billion Australian dollars ($ 636.1 million) this week against its aircraft fleet.