China Eastern Airlines has raised $691 million in perpetual debt financing from its majority shareholder, China Eastern Airlines Group, to improve its capital structure and enhance financial stability.
The financing, which carries an annual interest rate of 2.20%, aims to lower the airline's asset-liability ratio and enhance its risk resilience.
Perpetual bonds are a type of debt instrument that, unlike traditional bonds, do not have a maturity date. The issuer is not required to repay the principal as long as they continue to make regular interest payments (or coupons) to bondholders. This structure means that the debt remains outstanding indefinitely unless the issuer chooses to redeem the bond.
As the controlling shareholder, China Eastern Airlines Group holds approximately 54.2% of the airline’s shares, a stake acquired both directly and through its subsidiaries, China Eastern Financial Holdings and China Eastern International Holdings (Hong Kong).
The financing is structured as a perpetual bond with an initial term of three years, extendable for subsequent three-year periods.
The terms also note that the principal, along with any unpaid interest (including deferred interest), must be repaid when the bond reaches maturity or is terminated. According to the regulations of the Shanghai Stock Exchange, the transaction does not require additional guarantees.
This move highlights China Eastern Airlines' ongoing efforts to strengthen its financial position.