Deutsche Lufthansa successfully issued an unsecured €1bn 5.5 year Eurobond, which was reported to be oversubscribed by about 4 times after what it termed as “successful investor meetings the day before”.
The bonds priced with a 3.0% coupon, which tightened considerably from initial price guidance of 3.875%.
This is the airline’s first corporate bond since the pandemic crisis hit and the deal hit at the right time as airline stocks and credits were given a boost by the positive coronavirus vaccines news of the past two weeks.
Joint bookrunners on the Eurobond are Credit Suisse, Deutsche bank, Morgan Stanley and UniCredit.
This transaction followed the successful issue of a convertible bond of €600 million by Deutsche Lufthansa on November 10. Both issues further strengthen the company's liquidity position. As of September 30, the company had liquidity of €10.1 billion at its disposal (including the largely unused stabilisation measures in Germany, Switzerland, Austria and Belgium).
"The great success of both transactions underlines the confidence of the capital market in our company and our restructuring measures. This allows us to continue to use a wide variety of advantageous financing instruments. We have already successfully refinanced the majority of our financial maturities of EUR 3.2 billion in 2021," said Wilken Bormann, Executive Vice President Group Finance of Lufthansa Group.
Deutsche Lufthansa also announced its decision not to exercise the first call right of its €500 million hybrid bond, which matures on 12 August 2075 and carries 5.125% interest. The right to call the bond can therefore be exercised again on February 12, 2026. Furthermore, the coupon will be reset on February 12, 2021 (to the then applicable five-year market interest rate plus a margin of 4.783%, as detailed in the hybrid bond prospectus).
Meanwhile, Singapore Airlines (SIA) has successfully raised S$500 million via a private placement of new 10-year bond, which was upsized from the initial offer size of €300 million due to demand from what SIA calls a “select group of private investors”.
The 10-year bonds will carry a competitive coupon of 3.5% p.a..
DBS Bank and United Overseas Bank acted as joint lead managers of the issue.
This issuance further strengthens SIA’s liquidity position, and the proceeds will be used for general purposes including refinancing of existing borrowings.
“We would like to thank investors for their support for this bond issue, which follows the recent highly successful convertible bond issue. These reflect the strong confidence that investors have in the ability of Singapore Airlines to navigate the near-term challenges, and emerge as a leader in the airline industry,” said Goh Choon Phong, Chief Executive Officer, Singapore Airlines.
The airline also announced that it has been participating in “positive discussions” on further aircraft sale-leaseback deals, which it says it will continue to explore to strengthen its liquidity as needed.
Since the start of the 2020/2021 financial year, including this issuance, SIA has raised approximately S$12.7 billion in additional liquidity. This includes S$8.8 billion from SIA’s successful rights issue, S$2 billion from secured financing, S$850 million via a recent convertible bond issue, and more than S$500 million through new committed lines of credit and a short-term unsecured loan.
Including the new lines of credit, SIA will continue to have access to more than S$2.1 billion in committed credit lines. For the period up to July 2021, the airline also retains the option to raise up to S$6.2 billion in additional mandatory convertible bonds that would provide further liquidity if necessary.