Photo: Bloomberg

Singapore Airlines (SIA) is seeking to raise $6.2 billion as it proposes to undertake the issuance of the second tranche of mandatory convertible bonds (MCBs).

The terms of the second tranche of MCBs were approved by shareholders at the company’s extraordinary general meeting (EGM) on April 30, 2020, and renewed at its annual general meeting (AGM) on July 27, 2020.

Entitled shareholders will be offered on a pro-rata basis the right to subscribe to 209 MCBs for every 100 existing shares that they hold on the record date, being May 28.

“The liquidity that we will raise through the MCBs will further strengthen our financial position during these uncertain times, while providing the resources to position the SIA Group for growth and leadership,” says Peter Seah, Singapore Airlines’ chairman.

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“We have worked hard to retain and prepare our talented people to continue delivering the world-class service that SIA is renowned for. We will also continue to modernise our fleet with newgeneration aircraft that allow us to deliver greater comfort and innovative products to customers, and help to drive operating efficiency and lower carbon emissions,” he adds.

SIA previously sought to raise up to $15 billion through the renounceable rights issue of new shares in the company and MCBs.


See: Singapore Airlines to raise $15 bil via rights issue of new shares, mandatory convertible bonds


 

The rights shares were fully subscribed by valid shareholders, but the MCBs were snubbed at the time.

The announcement comes after the group posted a net loss of $803.7 million in the 4QFY2021 ended March, deepening its losses from the $417.6 million in the 4QFY2020.

Calling this its “toughest year in its history”, the loss in the quarter brings the group’s total net loss for the FY2020/2021 ended March to $4.27 billion, compared to net loss of $212 million in the FY2019/2020.

This was due to weaker operating performance during the year and non-cash impairment charges including an impairment charge of $1.44 billion recorded in the 1HFY2020/2021 on 33 aircraft that were deemed surplus to fleet requirements, as well as a total of $48 million in impairment from SIA Engineering Company (SIAEC).

Loss per share for the FY2020/2021 and 4QFY2020/2021 stood at 115.6 cents and 18.8 cents respectively.

For the FY2020/2021, the group reported an operating loss of $2.5 billion, from the $59 million operating profit in the FY2019/2020.

Group passenger traffic shrank 97.9% in the FY2021 from a year ago.

Group revenue for the FY2020/2021 plunged 76.1% y-o-y to $3.82 billion due to the drop in passenger flown revenue across the group’s three airlines – Singapore Airlines, SIlkAir and Scoot.

This was partly offset by higher cargo flown revenue, which increased 38.8% y-o-y to $2.71 billion.

Improvements in freighter utilisation, deployment of passenger aircraft for cargo-only flights and creating additional volume for cargo by the removal of seats helped to mitigate the loss .

Group expenditure fell 60.2% y-o-y to $6.3 billion.


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Net fuel cost fell 78.1% y-o-y to $1.02 billion due to capacity cuts and lower fuel prices in the 1HFY2020/2021.

Non-fuel expenditure dropped 51.8% y-o-y to $5.1 billion on capacity cuts, cost-saving initiatives, staff-related measures and government support schemes.

Mark-to-market losses of $497 million were recognised in the FY2020/2021 on ineffective fuel hedges, partly mitigated by a $283 million fair value gain on fuel hedges after a rise in fuel prices in the 2HFY2020/2021. The group has paused fuel hedging activity since March 2020.

As at March 31, cash and cash equivalents stood at $7.78 billion.

The group continues to retain access to $2.1 billion of committed lines of credit, all of which are undrawn to date.

The group says it expects its passenger capacity to be around 28% of pre-Covid-19 levels by June, and 32% of pre-Covid-19 levels by July.

It expects to serve around 49% of the points that were flown before the crisis.

No final dividend has been proposed for the FY2020/2021 in view of the losses incurred.

“The group is grateful to have received strong support from its shareholders, lenders, investors, and the Singapore government, to raise capital, provide liquidity and to manage costs,” writes the group in a May 19 statement.

“We are thankful to our customers who continue to support us, and to our staff for their sacrifices and staying resilient,” it adds.

Shares in SIA closed 16 cents lower or 3.3% down at $4.70 on May 19.