CORONAVIRUS: UPDATE – Singapore Airlines to raise S$15 billion with help from state fund Temasek

Singapore Airlines (SIA) said late Thursday (26 March) that it would raise at least S$15 billion (US$10.4 billion) in new funds using a mix of shares and bonds and that it also had arranged a S$4 billion bridge loan with DBS Bank to help it work through the problems airlines globally are facing from the COVID-19 coronavirus that has decimated international air travel and forced massive cuts in capacity. The deal was alluded to in a speech earlier in the day by the country’s Finance Minister Heng Swee Keat who said in a speech to Parliament that “I welcome Temasek’s decision to lend support to SIA. SIA is an outstanding airline and strategic asset for Singapore. The SIA group sits at the heart of our aviation system and anchors our position as an air hub. In 2019, SIA accounted for over half of passenger traffic and cargo tonnage in Singapore. 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.” The deal SIA is putting together includes offering all shareholders S$5.3 billion in new equity and up to a further S$9.7 billion1 through a 10-year Mandatory Convertible Bonds (MCB). Both will be offered on a pro-rata basis via a rights issue, and both issuances will be treated as equity in the company’s balance sheet, SIA said in announcing the deal. Empty check-in counters at Singapore’s Changi Airport. (PHOTO: Shutterstock) SIA’s largest shareholder, state fund Temasek Holdings, which owns about 55 percent of the airline, said it will vote in favour of the resolutions and procure a subscription for its full entitlement and the remaining balance of both issuances when the vote is held at Extraordinary General Meeting to be held sometime soon. SIA Chairman Peter Seah. (PHOTO: SIA) 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 moved quickly to cut capacity and implement cost-cutting measures. The strong commitment and support from our staff and our unions as we work together on measures to tackle this crisis have been remarkable. “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.” Temasek International CEO, Dilhan Pillay Sandrasegara, said: “The impact of COVID-19 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. It 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 will position it for growth beyond the pandemic.” Heng, who also serves as deputy prime minister, told the country’s Parliament that the government would develop a plan for a 75 percent wage offset scheme for the 192,000 people employed in aviation that would cost the country S$400 million and set aside an additional S$350 million in an “aviation support measure”. Heng said the measures are intended to deal with the “Black Swan” even that is the COVID-19 virus and said the aviation industry is a key industry for Singapore that “if it collapses will hurt the economy” and diminish the city-state’s ability to compete with its Southeast Asian neighbours. A screenshot of the virus tracking website from Johns Hopkins University. To access the live site, click on the image. (PHOTO: Matt Driskill) Singapore’s flag carrier earlier announced on 23 March that it was gutting its capacity by 96 percent because of strict border controls being imposed by various countries due to the ongoing spread of the virus that has killed more than 20,000 people worldwide. The airline is the latest to make drastic cuts as air travel grinds to a virtual halt. Cathay Pacific announced last week it was also cutting 96 percent of its capacity for itself and its Cathay Dragon unit. Qantas and its Jetstar also announced they were cutting capacity and grounding planes along with Philippine Airlines and Air New Zealand said it was cutting 85 percent of its capacity.