SINGAPORE (BLOOMBERG, REUTERS) - Singapore Airlines (SIA) has become the first carrier to tap the market for dollars in 2022, raising funds at a discount to peers thanks to its government backing.
The flag carrier sold US$600 million (S$807 million) of seven-year bonds to yield 3.493 per cent. That is nearly a percentage point lower than the average yield at issuance for global airline notes sold in 2021, according to Bloomberg-compiled data.
Hard hit like many of its peers due to the pandemic, the airline has sought to cover expenses by raising $22.4 billion via a rights offering and by issuing debt. Singapore's Temasek is SIA's largest shareholder.
The Singapore Government's decision last year to allow entry of fully vaccinated people from two dozen countries had given the city-state’s travel sector a lift. But the Government last month froze the sale of tickets for arriving flights under its quarantine-free travel programme for four weeks, citing the risk from the fast-spreading Omicron coronavirus variant.
SIA's newly issued bonds "could offer value given its support from Temasek and ample liquidity, offset by a slower recovery due to the lack of a domestic market", said Bloomberg Intelligence analyst Sharon Chen.
Though still way below its pre-pandemic level, the number of passengers at Changi Airport rose over the course of 2021. SIA recorded a "meaningful increase in traffic", though the onset of the Omicron led to a temporary suspension of quarantine-free travel.
SIA is not the only Asian carrier looking to tap funds this week. Korean Air Lines is marketing a Samurai bond, which is guaranteed by the Export-Import Bank of Korea, at 0.45 per cent. It is to be priced on Friday.
This is SIA's second United States dollar bond offering. A year ago, it raised US$500 million in a five-year issue with a 3 per cent coupon.
The airline was aiming to raise between US$500 million and US$750 million, sources said.
Despite the fall in travel demand, SIA has been spending billions of dollars renewing its fleet to help lower fuel burn and carbon emissions.
Net proceeds from the issue will be used for aircraft purchases, aircraft-related payments and general corporate or working capital purposes, including to refinance existing borrowings, SIA said.
SIA will issue the notes under its $10 billion multi-currency medium-term note programme.
The joint global coordinators for the issuance are Citigroup and DBS Bank. The banks are also joint lead managers along with Standard Chartered Bank Singapore and BNP Paribas.
SIA shares were trading unchanged at $5.02, as at 11.33am on Thursday.