Singapore—The country’s Deputy Prime Minister and Finance Minister, Heng Swee Keat, announced that Singapore Airlines (SIA) is considering corporate action as it deals with the economic fallout from the current coronavirus pandemic that has affected the globe.
This action will be supported by state-investment fund Temasek, which controls 55.46 percent of SIA’s shares.
After Mr Heng’s announcement, SIA said that its goal is to raise as much as S$15 billion to address financial woes by issuing new shares to its existing shareholders as well as issuing mandatory convertible bonds, straitstimes.com reports. Temasek will take up the remaining bonds and shares that are not subscribed.
In a series of tweets, the company announced, “@SingaporeAir will raise S$5.3 billion in new equity through a placement being offered to all existing shareholders including @Temasek, and up to S$9.7 billion by way of 10-year Mandatory Convertible Bonds.
@Temasekwill subscribe to its full prorata allocation of both issuances by @SingaporeAir, and underwrite remaining balances of both issuances in full.
@Temasek CEO Dilhan Pillay on our subscription to @SingaporeAir issuances: “The impact of #COVID19 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….
…SIA 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 position it for growth beyond the pandemic. We fully support SIA’s plans to transform itself”: Dilhan.”
ANNOUNCEMENT: @SingaporeAir will raise S$5.3 billion in new equity through a placement being offered to all existing shareholders including @Temasek , and up to S$9.7 billion by way of 10-year Mandatory Convertible Bonds
— Temasek (@Temasek) March 26, 2020
Mr Heng said in Parliament on Thursday (Mar 26) that he had been informed that SIA was considering corporate action, supported by Temasek Holdings, and would be making an announcement at a later time. He added that he welcomed Temasek’s decision to support SIA, calling the airline “an outstanding airline and a strategic asset for Singapore.”
He added, “Through the Government’s support for the aviation sector, and if necessary more direct support measures, we will make sure that SIA is able to come through this in good shape.
Ultimately, this is about preserving the status of our air hub so that it can emerge stronger from this crisis.”
SIA announced earlier this week that it was decreasing its flight capacity by 96 percent through the end of next month. Furthermore, out of its 196 planes, 185 have been grounded.
Earlier on Thursday, SIA stopped trading of its shares and announced that it was seeking refinancing due to its weakened balance sheet.
Singapore’s national carrier has called the current crisis “greatest challenge that the SIA Group has faced in its existence”. On Monday (Mar 23), its shared fell to its lowest price in over two decades (S$5.35) but by Wednesday had bounced back by over 10 percent (S$6.50).
When 2020 began, it was trading shares at S$9.11.
Mr Heng unveiled a second economic stimulus package in Parliament on Thursday, which included the announcement about Temasek’s support of SIA. He also said that the Government will be paying 75 percent of the salaries of all aviation industry workers, with a maximum of S$4,600 monthly, totaling S$15.1 billion.
Another S$350 million has been allotted for the airline sector for airlines’ rental relief and rebates on charges for landing and parking.
Regarding the national carrier’s future, the Deputy Prime Minister continued, “As the main hub carrier, SIA links us to the rest of the world. Many foreign airlines choose to come to Changi because they can tap on SIA’s connectivity to the rest of the region.
A diminished SIA will undermine our air hub’s ability to recover from the crisis. Air travel will eventually resume when Covid-19 comes under control. Until then, SIA will need liquidity to tide over this outbreak.” —/TISG
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