BEIJING • Chinese conglomerate HNA Group's Hong Kong Airlines is considering an initial public offering (IPO) in the "short to medium term" and tapping investors to raise funds through the issue of new shares and convertible bonds, a document reviewed by Reuters showed.
Ahead of the planned listing, HNA is seeking to raise about US$350 million (S$469 million) by selling new shares, expanding its equity base by 22 per cent, according to the document dated last month. That would give the 12-year-old airline a pre-IPO valuation of about US$1.6 billion, based on Reuters calculations.
The company also wants to raise up to US$550 million via convertible bonds or tradable bonds before the listing, the document showed.
The bond issue will be at a coupon rate of 8 to 10 per cent for a two-to five-year period, according to the document.
In comparison, Virgin Australia Holdings, a partner of Hong Kong Airlines - which also lacks an investment-grade rating - this month raised A$150 million (S$152 million) through a senior unsecured bond at a coupon of 8.25 per cent, according to Thomson Reuters IFR.
These latest moves, previously unreported, signal that IPO plans for Hong Kong Airlines are back on after HNA tried to take it public a few years ago, eventually abandoning those plans in 2015.
That attempt failed as it was unable to satisfy the requirements from the Hong Kong Stock Exchange in the timeline provided.
The document reviewed by Reuters did not contain the reasons behind the new push for an offering, or the investor interest HNA may be able to generate.
The Chinese aviation-to-financial services firm, which struck merger and acquisition deals worth about US$50 billion in 2016 and last year, is faced with soaring debt and a Beijing crackdown on aggressive Chinese acquirers.
HNA, which is selling a number of assets, is undergoing a wider reorganisation under which it is partnering companies to manage some of its assets.
Reuters reported last month that HNA Group is seeking to raise as much as US$1.5 billion by the year end in an investment fund that will serve as a vehicle for the group's acquisitions.
Some of HNA's other recent IPO efforts have been delayed or scrapped. HNA Group's Swiss ground services and cargo handling unit, Swissport Group, deferred plans to float shares on the SIX Swiss Exchange, citing market conditions. HNA Group also scrapped its planned listing of Swiss-based airline caterer gategroup.
The new capital-raising plans come at a time when Singapore investment company Temasek Holdings has expressed interest in buying into Hong Kong Airlines and its unit Hong Kong Express Airways, Reuters reported last month.
The document obtained by Reuters showed that Hong Kong Airlines is targeting annual revenue of HK$14.97 billion (S$2.6 billion) this year and a compound annual revenue growth rate of 15 per cent between 2015 and this year.
Hong Kong Airlines operates 38 aircraft and flies to 40 cities in the Asia-Pacific, Australia and North America.
REUTERS
