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Singapore Airlines: Capital Increase and Bond Issue

D&T
March 30, 2020

Singapore Airlines Limited (SIA) will offer all shareholders SGD 5.3 billion in new equity and up to a further SGD 9.7 billion1 through a 10-year Mandatory Convertible Bonds (MCB). Both will be offered on a pro-rata basis via a rights issue, and both issuances will be treated as equity in the Company’s balance sheet.

SIA has also arranged a SGD four billion bridge loan facility with DBS Bank, supporting the Company’s near-term liquidity requirements.

The Company intends to use the proceeds from the rights issues to fund capital and operational expenditure requirements. Both rights issuances are subject to shareholder approval at an extraordinary general meeting (EGM) that will be held in due course.

SIA’s largest shareholder, Temasek Holdings will vote in favor of the resolutions and procure a subscription for its full entitlement and the remaining balance of both issuances.

SGD 3.5 billion will initially be raised through the MCB, while the remaining SGD 6.2 billion can be raised over subsequent months.

SIA Chairman Peter Seah said: “This is an exceptional time for the SIA Group. Since the onset of the Covid-19 outbreak, passenger demand has fallen precipitously
amid an unprecedented closure of borders worldwide. We moved quickly to cut capacity and implement cost-cutting measures.

“The strong commitment and support from our staff and our unions as we work together on measures to tackle this crisis have been remarkable. I am heartened that our people are doing everything they can, in these most difficult of times, to support our customers and sustain our operations. We have also worked closely with the Singapore government to bring Singaporeans home safely during this time. At the same time, we are also working with various parties to enable our staff on no-pay leave to have other income opportunities.

“We are especially grateful for Temasek’s strong vote of confidence. The Board is confident that this package of new funding will ensure that SIA is equipped with the resources to overcome the current challenges, and be in a position of strength to grow and reinforce our leadership in the aviation sector.”

Temasek International CEO, Dilhan Pillay Sandrasegara, said: “The impact of Covid-19 on the global travel industry is unprecedented, especially for airlines and the related sector players. SIA has been seeing strong growth before the hit from the pandemic. It has also committed to fleet renewal as part of its transformation journey. This transaction will not only tide SIA over a short term financial liquidity challenge, but will position it for growth beyond the pandemic.

“We fully support SIA’s plans to transform itself. This includes the modernisation of its fleet. The delivery of a new generation aircraft over the next few years will provide better fuel efficiencies as well as meet its capacity expansion strategy.”

The aviation sector is a key pillar of Singapore’s economy, supporting more than 12% of the country’s GDP and 375,000 jobs. The Group is at the heart of the aviation ecosystem, with SIA, SilkAir and Scoot accounting for more than half of the passengers flying in and out of Changi Airport.

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