SINGAPORE (THE BUSINESS TIMES) - Singapore Airlines (SIA) has raised $850 million through a convertible bond issue that received strong interest from institutional investors.
The offer was more than four times oversubscribed, said the airline on Friday (Nov 13), adding: "As a result, the issuance was upsized from the initial $750 million to $850 million with more attractive terms for SIA."
Proceeds from the bond issue will be used to fund operating and capital expenditure, as well as to service debts, said the flag carrier.
The new $850 million five-year convertible bonds will carry a coupon of 1.625 per cent per annum and be issued at par.
The bonds can be converted into ordinary shares at $5.743 for each new ordinary share. This represents a premium of about 45.8 per cent over SIA's last closing stock price on Thursday.
If the bonds are all converted, the company will allot and issue about 148 million new ordinary shares, which make up about 5 per cent of the existing issued shares, excluding treasury shares.
The unsubordinated and unsecured bonds will mature on Dec 3, 2025.
SIA on Friday said all the convertible bonds have been fully placed to institutional investors and other investors.
The holders can opt to convert them at least 41 days after the date of issue up to the close of business on the 10th day prior to the maturity date, both dates inclusive.
SIA chief executive Goh Choon Phong noted that the placement was executed with a "highly competitive coupon and substantial conversion premium".
"Such attractive terms for the company underscore the strong confidence that investors have in Singapore Airlines, as well as our ability to successfully overcome the near-term challenges and emerge as a leader in the airline industry," he said.
The airline said it plans to allocate some 60-80 per cent of the proceeds from the deal for operating cash flow and debt service, while 20-40 per cent will go into capital expenditure.
It had proposed the issuance on Thursday evening. Earlier this year, SIA raised $8.8 billion from a rights issue, and has the option of raising up to another $6.2 billion in additional mandatory convertible bonds, which it can exercise by July 2021.
For the purposes of illustration, the net tangible asset (NTA) per share after the bonds are issued but before any conversion would be $5.06, based on the group's unaudited financial statements as at Sept 30, 2020, compared to $5.04 before the issuance, SIA said.
And assuming full conversion of the bonds, the adjusted NTA per share is estimated to be $5.07, based on the financial statements as at Sept 30, 2020.
Net gearing would stand at 0.26 time after the bonds are issued, and improve to 0.2 time assuming full conversion, from 0.27 time as reported in the Sept 30, 2020 financial statements, for illustrative purposes.
SIA will apply to list the convertible bonds and new shares arising from the conversion, on the Singapore Exchange.
HSBC was the sole bookrunner and lead manager of the deal.
SIA shares fell 2.79 per cent to $3.83 on Friday.