Published on : Monday, March 30, 2020
Temasek Holdings, the state investor and majority shareholder of Singapore Airlines recently declared that it would tie-up with others and bring together a package of up to $13.27 billion to support Singapore Airlines.
Temasek, which owns around 55% of the group, might underwrite the sale of shares and convertible bonds for up to S$15 billion. This is by far the single biggest rescue for any airline that has been harshly impacted by the COVID-19 pandemic.
Singapore Airlines would be using the cash to face the adverse challenges brought by the virus spread and to expand itself once the trying times pass. The carrier has decided to offer all shareholders S$5.3 billion in new equity. It will also provide a further S$9.7 billion through ten-year mandatory convertible bonds.
Both will be offered on a pro-rata basis via a rights issue. The issuances will be treated as equity in the company’s balance sheet. In addition, Singapore Airlines has arranged an S$4 billion bridge loan facility with DBS Group Holdings Limited, the country’s biggest lender. This money would be used to support the company’s near-term liquidity requirements, until the completion of the share offering.
Peter Seah, Chairman, Singapore Airlines said in a recent press statement that the present time is exceptional for the SIA group. He informed that passenger demand underwent a huge plunge ever since the outbreak of the coronavirus due to an unprecedented closure of borders worldwide.
He said that Singapore Airlines immediately decided to cut capacity and began implementing cost-cutting measures. He shared that the company also worked closely with the Singapore government to bring Singaporeans home safely during the global crisis. He also mentioned that at the same time, Singapore Airlines is also working with various parties to grant their staffs a no-pay leave so that they have other income opportunities.
He further appreciated Temasek’s strong vote of confidence. He said that the board is confident the new funding package will ensure that SIA is equipped with the resources to overcome the present challenges. It would also mean that the airline is in a position of strength to grow and reinforce its leadership in the aviation industry.
Singapore’s aviation sector is one of the biggest contributors to the country’s economy. It supports more than 12% of the country’s GDP and approximately 375,000 jobs. Singapore Airlines, SilkAir and Scoot is responsible for more than half of the passengers flying in and out of Changi Airport.