Monday, May 04, 2020

Singapore Airlines commits to Vistara, no obligation to Virgin Australia

The raging coronavirus crisis created air pockets for Singapore Airlines (SIA), which has cast doubts about its future commitment to Virgin Australia, just ahead of its crucial meeting of Extraordinary General Meeting (EGM) for shareholders. But the carrier affirmed belief in Vistara, its joint venture with The Tata Group.

SIA, Singapore's well-regarded international airline, has not been spared the financial calamity that the Covid-19 coronavirus outbreak has inflicted on global airlines. The impact is aggravated by the fact that it has no domestic market which would be the part of the business most airlines will rely on to recover first once restrictions are lifted.
In March, it announced a financial rescue plan to raise SGD8.8 billion ($6.2 billion) backed by its 55 per cent shareholder, Temasek Holdings, the Singapore government investment arm.

The capital raising exercise comprise a rights issue that will offer existing shareholders 1.77 billion new shares at SGD3 each based on three rights shares for every two existing shares. This will result funding proceeds of SGD5.3 billion. SIA will also raise up to SGD3.4 billion via a 10-year zero coupon mandatory convertible bond (MCB) issued on the basis of 295 rights MCB for every 100 existing shares. The MCB will be priced at SGD1 each and if not redeemed before maturity in 10 years, they will be converted to new shares based on a conversion price of SGD4.84. SIA shares closed last week at SGD6.11. At that price, the theoretical ex-rights price is SGD4.24 after taking into account dilution.

On April 30, 99.79 per cent of SIA shareholders approved the proposal at a virtual EGM held via video conferencing as Singapore is at the moment in a midst of an 8-week lockdown.

In a written response to shareholders questions ahead of the meeting published on April 29, SIA decline to discuss Virgin Australia's recent announcement on voluntary administration saying that it is too early for any further comment. SIA owns 20 per cent of Virgin Australia. It however said that it has no obligations or requirement to put in capital for Virgin Australia, that the equity investment is fully provided for in its books, and it has made no loans to the stricken Australian airline.
04/05/20 Business Standard
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