Singapore Airline’s rescue plan is revealed in a recapitalization exercise. Temasek, which owns 55.5% of the national carrier, is the underwriter of the program. Below are some highlights:
A S$8.8bn Fundraising exercise
S$5.3bn equity rights issue. Shareholders will receive 3 Rights shares for every 2 existing shares at an issue price of S$3 (c.53.8% discount to the last traded price). This amounts up to 1,777,692,487 new Rights shares to be issued.
S$3.5bn Mandatory Convertible Bond Issue. Shareholders will receive 295 Rights Mandatory Convertible Bonds (MCB) for every 100 existing shares, with the option to subscribe at $1 per MCB. The Convertible Bonds are proposed to have a 10-year maturity with zero coupon and an initial conversion price of S$4.84. At the maturity date, every S$1,000 worth of MCB will be worth S$1,806.11, and will be converted to shares at the conversion price of S$4.84 per share.
SIA may issue up to S$6.2 billion in additional MCBs to a total of S$9.7 billion depending on shareholder approval. The funds raised will be used to weather the downturn. This means covering costs such as operating expenses (S$3.7bn), aircraft expenses (S$3.3bn), and debt servicing and other contractual payments (S$1.8bn).
Temasek has pledged to support both the equity rights and MCB issues by subscribing for or procuring any unsubscribed Rights shares, and excess/additional Rights Mandatory Convertible Bonds now and in future plans.
A S$4bn Bridge Loan Facility
SIA has established a bridging loan with DBS Bank to assist with cash flow requirements in the near-term.
This fundraising exercise is expected to carry SIA over the crisis. With Temasek’s backing, SIA will have access to a total of S$12.8bn of liquidity to tide through this period. Add this to the support from the enhanced Job Support Scheme and enhanced Aviation Support Package, things look better for SIA and its bondholders.