The Securities Investors Association (Singapore), or Sias, has drafted questions for Singapore Airlines (SIA) to address and publish before the national carrier's April 30 extraordinary general meeting (EGM) on its proposed $15 billion debt and equity capital raising.
The flag carrier last month announced the massive cash call to tide it over the coronavirus pandemic that has decimated global air travel. One part of it is a proposed $8.8 billion renounceable rights issue, comprising a three-for-two issue of up to 1.78 billion shares to raise $5.3 billion and an offering of up to $3.5 billion in 10-year mandatory convertible bonds (MCBs).
The other component is an additional issue of up to $6.2 billion in additional MCBs to be offered to shareholders via one or more rights issues down the line. For the $8.8 billion rights issue, Sias president and chief executive David Gerald asked why a large portion of it - 38 per cent, or $3.3 billion - will be used for capital expenditure purposes.
In a letter addressed to SIA chief executive Goh Choon Phong yesterday, Mr Gerald also asked that the company explain why it is raising such a large amount in its cash call.
As for the rights issue price of $3 per share, Sias asked how this figure was determined, and whether the discount - of about 53.8 per cent to March 25's closing price of $6.50 - is in line with market levels.
Sias also questioned why the carrier chose to raise cash from shareholders, and whether it has explored other means such as taking out loans from banks.
Some of the investor advocacy group's questions involve the rationale behind the MCBs' conversion price of $4.84, and the differences in yield depending on when the MCBs are redeemed.
If SIA redeems the MCBs within the first four years, for instance, the yield to call will be 4 per cent per annum, compounded on a semi-annual basis. If the bonds are redeemed within five to seven years, the yield is 5 per cent; and if redeemed within eight to 10 years, it will be 6 per cent.
Queries were also raised on whether the general meeting will be conducted in a way that is accessible to all shareholders, and how the airline plans to improve its operational performance to shore up its stock price in the light of the Covid-19 crisis.
Both the rights issue and the additional issue will be tabled for shareholders' approval at the EGM, which will be conducted by the airline group's chairman Peter Seah and CEO, Mr Goh.
The carrier's shares closed 3.53 per cent lower yesterday at $6.01.
THE BUSINESS TIMES
