SIA to raise S$15 billion by issuing shares and bonds, Temasek Holdings to back its plans

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SINGAPORE — Singapore Airlines (SIA) will be trying to raise S$15 billion of funds by issuing new shares to its shareholders, firstly through offering S$5.3 billion in new equity and up to S$9.7 billion of 10-year mandatory convertible bonds. 

Existing shareholders can buy these new issuances proportionate to the amount of SIA shares they are already holding, and these shares will be treated as equity in SIA’s balance sheet. 

In a press release in the early hours of Friday (March 27), Singapore’s national carrier said that its largest shareholder, Temasek Holdings, will vote in favour of SIA’s plans and buy all remaining shares and bonds, in addition to the full amount it is entitled to.

The state investment firm owns about 55 per cent of SIA. 

The money raised from these issuances will be used to fund capital and operational expenditure requirements, the airline said. 

More than 1.7 billion of the shares to be issued will be offered at S$3 each, which is more than 50 per cent lower than SIA’s last closing share price at S$6.50 on Wednesday.

The bonds will be offered over a few tranches, with S$3.5 billion issued first, while the rest will take place over the subsequent months.

SIA also said that it has arranged a S$4 billion bridge loan facility with DBS bank — another portfolio company of Temasek — which would help support its near-term liquidity needs. 

The statement from the airline came after Deputy Prime Minister Heng Swee Keat said in Parliament on Thursday that it is considering a corporate action which would be supported by Temasek. 

“I welcome Temasek’s decision to lend support to SIA. SIA is an outstanding airline and a strategic asset for Singapore.

“Through the government 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,” Mr Heng said when he was unveiling more measures for the aviation sector hit hard by the Covid-19 pandemic. 

The coronavirus that has infected more than 410,000 people across more than 190 countries has simultaneously wreaked havoc on the aviation industry globally, with demand for international air travel obliterated and governments closing their borders to curb the spread of the disease which had its first outbreak in Wuhan, China.

SIA has not been spared and has had to implement cost-cutting measures recently, as its chief executive officer Goh Choon Pong announced that he would take a 30 per cent pay cut and others in senior management also taking a 20 to 25 per cent pay cut. 

Its pilots will be required to take up to seven days of no-pay leave a month from April, while other staff members will have to take one to two days of no-pay leave between April and May. 

On Thursday morning, the airline announced a trading halt.

Earlier this week, SIA said that it will ground almost all its fleet that was originally scheduled until the end of April. 

The aviation industry supports more than 12 per cent of Singapore’s gross domestic product and 375,000 jobs.

SIA, SilkAir and Scoot account for more than half of the passengers flying in and out of Changi Airport, SIA said.

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 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.”

Mr Dilhan Pillay Sandrasegara, chief executive officer of Temasek International, the management and investment arm of Temasek Holdings, said: “This transaction will not only tide SIA over a short-term financial liquidity challenge, but will position it for growth beyond the pandemic”.