Singapore Airlines (SIA) is proposing to issue the second tranche of Mandatory Convertible Bonds (Rights 2021 MCBs), which will raise approximately S$6.2 billion in additional liquidity.
Shareholders can participate in the recovery and future growth of the SIA Group by subscribing to the Rights 2021 MCBs. Temasek, SIA’s largest shareholder, has provided an undertaking to subscribe to its pro-rata entitlement and any remaining balance of this issuance.
The terms of the Rights 2021 MCBs are as approved by shareholders at the Company’s Extraordinary General Meeting on 30 April 2020, and renewed at the Company’s Annual General Meeting on 27 July 2020.
Entitled shareholders will be offered on a pro-rata basis the rights to subscribe to 209 MCBs for every 100 existing shares that they hold at the record date. The MCBs will be treated as equity in the Company’s balance sheet, strengthening SIA’s financial position.
The MCBs are not immediately dilutive and will provide the Company with the flexibility to manage its capital structure, with partial or full redemption allowed on every six-month anniversary of the issue date at the Company’s discretion. The holders will be entitled to a yield that accretes and will be payable at the point of any redemption. The MCBs will be automatically converted to ordinary shares if they are not redeemed prior to the maturity date.
SIA states that the issuance will allow the group to maintain a strong equity base and provide it with additional options moving forward to raise further debt financing as necessary.
Singapore Airlines Chairman Peter Seah said: “Since 1 April 2020, we have raised S$15.4 billion in fresh liquidity that has given us a strong foundation as we navigated the challenges posed by the Covid-19 pandemic with the support of our stakeholders.
“However, this crisis is not over. While the growing pace of vaccinations has given us hope, new waves of infections around the world mean that restrictions on international travel largely remain in place. The SIA Group has grown its passenger capacity and resumed selected services in a safe and calibrated manner, but industry bodies forecast that air traffic is not expected to recover to pre-Covid-19 levels until 2024.
“The liquidity that we will raise through the MCBs will further strengthen our financial position during these uncertain times, while providing the resources to position the SIA Group for growth and leadership. We have worked hard to retain and prepare our talented people to continue delivering the world-class service that SIA is renowned for. We will also continue to modernise our fleet with new-generation aircraft that allow us to deliver greater comfort and innovative products to customers, and help to drive operating efficiency and lower carbon emissions.”
Further details of the MCBs will be made available in the Offer Information Statement, which is expected to be lodged with the Monetary Authority of Singapore on 28 May 2021.
Meanwhile, the group has announced a $4.3bn net loss for its fiscal year end March 2021 – a deterioration of $4,059 million against last year. Group revenue fell by $12,160 million (-76.1%) year-on-year to $3,816 million due to the plunge in passenger flown revenue across Singapore Airlines, SilkAir and Scoot – the three passenger airlines within the Group. This was partially offset by higher cargo flown revenue, which rose by $758 million (+38.8%) year-on-year to $2,709 million. Passenger traffic fell 97.9% during the fiscal year due to global restrictions on international travel, although the group was cushioned slightly by strong cargo revenues.
SIA has also booked a $2.0 billion non-cash impairment charge largely on removal of 45 older aircraft. The impairment charge of $1,448 million recorded in the first half on 33 aircraft deemed surplus to fleet requirements: seven A380s, four 777-200/200ERs, four 777-300s, nine A320s, two A319s and the seven 777- 200 aircraft repossessed from NokScoot. A second impairment charge of $286 million was recognised in the second half of the year on more surplus aircraft following a further review of the network requirements and market values of the fleet. This pertained mainly to four additional 777-300ERs and eight 737-800NGs deemed surplus to fleet requirements, as well as a further write-down on four of the A320s impaired in the first half due to a reduction in their market values. This brings the total impairment charge on 45 surplus aircraft for the year to $1,734 million.
SIA also recognised an impairment of goodwill of $170 million recorded when SIA first gained control of Tiger Airways in October 2014, after a review of the impact of Covid-19 on business conditions in the first half of FY2020/21.
SIA liquidity is $7.8 billion, while total debt increased by $2.6 billion to $14.3 billion due to the drawdown of new debt facilities. Consequently, the Group’s debt-equity ratio fell from 1.27 times to 0.90 times.
During the fourth quarter, SIA issued its first USD-denominated bond in January 2021, raising US$500 million (S$668 million equivalent). A further $1.2 billion was raised through aircraft sale-and-leaseback transactions. In FY2020/21, SIA raised capital totalling approximately $14.6 billion: $8.8bn from a June 2020 rights issue, $8.8bn secured financing for one A350-900 and one 787-10 aircraft, some $2.1bn from its Convertible Bond and Notes issuance and $2.0bn from its aircraft sale-and-leaseback transactions, with $500 million in committed lines of credit and short-term unsecured loan
SIA raised a further $0.8 billion in April 2021 through the completion of aircraft sale-and-leaseback transactions, thus bringing total fresh liquidity to $15.4 billion since the beginning of FY2020/21. In addition, the Group continues to retain access to $2.1 billion of committed lines of credit, all of which remain undrawn.
The Group operating fleet currently consists of 162 passenger aircraft and seven freighters. This excludes 414 aircraft which are deemed surplus to the Group’s requirements, six Boeing 737 MAX 8s that have been temporarily withdrawn from service, and two aircraft (one Airbus A330 and one Airbus A320) that left the operating fleet in preparation for lease returns.