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Thu, Nov 12 2020 – 6:41 pm
UPDATED Thu, Nov 12, 2020 – 8:22 pm
SINGAPORE Airlines (SIA) proposes to issue up to S $ 850 million in principal amount of bonds, convertible into new common shares in the company’s capital, it announced Thursday night after the market closed.
It is proposed to place the convertible bonds with institutional investors and other investors. HSBC has been designated as the sole book broker and principal administrator of the issue.
The figure of S $ 850 million is indicative. The terms of the bonds, including the total amount of principal to be issued, will be confirmed when pricing the issue, after HSBC completes a book-building exercise.
The price was expected to arrive on or around Thursday, with SIA making an announcement of final terms later.
SIA will ask SGX to list the convertible bonds and the new shares. The issuance of the bonds is subject to approval in principle for their listing.
The issuance closing date is expected to be December 3 or around that date. SIA expects to use the proceeds to fund operating cash flow, debt service and capital expenditures.
SIA said: “The financial effects of the issue will depend on the terms of the convertible bonds and will be announced in the announcement that the company will issue after the issue price.”
Independent aviation analyst Brendan Sobie of Sobie Aviation said SIA may have chosen to issue convertible bonds rather than activate its mandatory convertible bond (MCB) program because MCBs have relatively high rates of return.
“I see the MCB as a safety net if SIA cannot secure new capital through other sources,” he said. Given that SIA has been analyzing options to improve liquidity, the issue of convertible bonds could be followed by other movements in the coming months, he added.
“SIA’s financial health is relatively strong, particularly compared to virtually any other airline group in the region,” he said, adding that with the new bond issuance and other possible measures to boost liquidity, “SIA is ensuring that they have more than enough to weather the storm and be in a strong position once we emerge from this terrible crisis. “
Shares of the national carrier closed up 2 Singapore cents or 0.51 percent at S $ 3.94 on Thursday, ahead of the news.
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