Singapore Airlines (SIA) said on Thursday (14 January) that it has raised US$500 million (S$660 million) in its first US dollar bond issue, in which the proceeds will be utilised on buying new aircraft.
SIA stated that the five-and-a-half-year bond, which carries a 3 per cent coupon rate, was finalised after bookrunners received bids above US$1.5 billion.
The final demand had reached more than US$2.85 billion, in which the airline said was anchored by “high-quality institutional investors”.
“The issuance further strengthens the company’s liquidity position, and provides SIA with the financial flexibility to capture medium-to-long-term growth beyond the COVID-19 pandemic,” it asserted.
Additionally, the proceeds will also be used on other related payments and general purposes including refinancing of existing borrowings, the company said.
The latest issuance brings to S$13.3 billion in additional liquidity that SIA had raised since the start of the 2020/2021 financial year, as reported by CNA.
This includes S$8.8 billion from a rights issue, S$2 billion from secured financing and S$850 million from a convertible issue.
“We thank our investors for their strong support of Singapore Airlines’ debut issuance of US-dollar bonds. We are confident that this will further strengthen SIA’s competitive advantage in the industry, and bolster our ability to emerge stronger from the challenges posed by the COVID-19 pandemic,” said CEO Goh Choon Phong.
SIA burns half of S$8.8 billion raised in 2 months with fuel hedging last year
In the 2019/2020 financial year ending 31 March, SIA suffered its first annual loss in its nearly half a century of history. This was due in part to the US$638 million in charges on failed oil hedges.
SIA’s shareholder Lim Seng Hoo has implored the company to put an end on its fuel-hedging practice, given that the airline had a “10-year record of over S$2.452 [billion] losses” as of March 2016.
Bloomberg reported that the airline has burned through half of the S$8.8 billion it raised through share sales – which SIA raised last June primarily with the support of its parent company Temasek – in just two months, even as its planes were grounded amid the COVID-19 pandemic.
Of the S$4.4 billion spent since mid-June last year, SIA reported:
(a) S$1.1 billion has been applied towards the funding of operating expenses, settlement of maturing fuel hedging trades and ticket refunds following the cancellation of flights due to the coronavirus pandemic;
(b) S$0.2 billion or $200 million has been applied towards aircraft purchases; and
(c) S$0.9 billion or $900 million has been applied towards debt service, which included the redemption of SIA’s 10-year Fixed Rate Notes and repayment of funds previously drawn under certain lines of credit.
About S$2 billion was also used to repay a bridge loan facility earlier obtained from DBS.
