On Friday morning (27 March), following the announcement of the government’s Resilience Budget worth S$48.4 billion to combat the COVID-19 pandemic, Singapore stocks opened higher 2.6 per cent. As of 9.03am, the Singapore Straits Times (STI) rose 65.65 points or 2.6 per cent to reach 2,553.19. At 3:55pm, the STI value was slightly lower in the 2,530s at about 1.5 per cent.
Following this, the stock price of Singapore Airlines (SIA) showed signs of volatility following the airline’s move to issue new shares and bonds at a sharp discount in order to raise S$8.8 billion funding.
After around 10 minutes of the opening bell, the counter plummeted by as much as 10.1 per cent or from S$0.66 decrease value to S$5.85 decrease value.
At about 9.40am, the stock price rebounded to S$6.31, after which it dropped again to S$6.07 at 1.33pm. This marks a 6.6 per cent decline or S$0.43 decline from the closing of the day before.
SIA was one of the most actively traded counters on SGX so far, with close to 14 million shares of SIA having been traded during that period.
The trading stop imposed on Thursday morning (26 March) was lifted on Friday morning as the stock trading began.
On Thursday night, SIA proposed the fund-raising, with Temasek fully underwriting the process.
On the basis of three rights shares per two existing shares held by shareholders, a renounceable three-for-two rights up to 1.77 billion new shares priced at S$3 will be issued. From this, S$5.3 billion was raised.
Based on the last transacted price of S$6.50 on 25 March, the issue price denotes a discount of around 53.8 per cent. SIA stated that the theoretical ex-rights price will be S$4.40.
Regarding the new share sale, SIA will obtain approval from shareholders.
By issuing a 10-year mandatory convertible bond (MCB) based on the basis of 295 Rights MCBs per 100 existing owned shares, SIA is also hoping to raise up to S$3.5 billion. The bonds come with zero coupon, valued at S$1 each respectively.
“This is an exceptional time for the SIA group. Since the onset of the Covid-19 outbreak, passenger demand has fallen precipitously amid an unprecedented closure of borders worldwide. We moved quickly to cut capacity and implement cost-cutting measures,” remarked Peter Seah, Chairman of SIA, on Thursday.
Mr Seah added, “The board is confident that this package of new funding will ensure that SIA is equipped with the resources to overcome the current challenges, and be in a position of strength to grow and reinforce our leadership in the aviation sector.”
Echoing the same sentiment, Dilhan Pillay Sandrasegara, Temasek International’s Chief Executive, noted, “This transaction will not only tide SIA over a short-term financial liquidity challenge, but will (also) position it for growth beyond the pandemic.”
Mr Sandrasegara also hinted that SIA will receive Tamesek’s full support in the airline’s efforts to renew itself by acquiring new fuel-efficient aircraft over the next few years to modernise its fleet as part of its expansion strategy.
The Singapore government announced the supplementary budget on Thursday, called the Resilience Budget, and part of the provision is the 75 per cent wage offset for the aviation sector so that the collapse of the sector can be prevented.
Facing the largest crisis up to now, SIA announced on Monday that it would slash its capacity by a huge margin up to 96 per cent until the end of April. SIA and SilkAir now see 138 of their combined 147 fleet grounded whereas Scoot, the budget unit, will suspend almost all of its network. What’s more, led by Chief Goh Choon Phong, SIA’s senior management will take salary cuts, with 30 per cent cut from April.
Furthermore, other measures include voluntary no-pay leave as a choice for workers, furlough option for staff on re-employment contracts, and different days of compulsory no-pay leave for pilots, executives, and associates.
These measures will affect 10,000 workers overall. Nonetheless, SIA, by partnering with various parties, is finding ways to allow workers on no-pay leave to earn an income through other means.
In light of all of this, despite the Resilience Budget and the fund-raising efforts, Singapore Airlines Limited saw a negative percentage change in its stock price by -6.15% with 16,514,200 trading volume. Other companies that share similar experience are Jardine Strategic Holdings Limited and Singapore Exchange Limited at -0.90 per cent and 1.44 per cent respectively.
Meanwhile, the top performers are companies such as Genting Singapore Limited (+8.13%) and SATS Ltd (+6.63%), followed by Dairy Farm International Holdings Limited (+5.57%) and Mapletree Logistics Trust (+5.19%).
This possibly suggests that it will take more to prop up SIA beyond the fund-raising and Resilience Budget, or that the market is still adjusting to these two events at this point in time.