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Singapore Airlines (SIA) (SIAL.SI) is tapping existing investors for up to S$15 billion ($10.48 billion) through the sale of shares and convertible bonds to offset the shock to its business from the coronavirus outbreak.

The fundraising is being underwritten by the airline’s biggest investor, state-owned Temasek Holdings [TEM.UL], which owns about 55% of the group. 

“This is an exceptional time for the SIA Group,” SIA Chairman Peter Seah said in a statement late on Thursday. 

SIA’s shares went into a rare trading halt earlier in the day after plunging to their lowest in 22 years as investors feared the pandemic will have a deep impact on the company. 

Many governments worldwide have already stepped in to help airlines hammered by the virus-induced travel slump, with the United States offering $58 billion in aid as widespread travel restrictions force many carriers to ground fleets and order thousands of workers on unpaid leave to keep afloat. 

“Under the current dire circumstances, the rights issue is the best tactical move for SIA. It underscores the carrier’s strategic importance to Singapore and the island state’s position as both a financial centre and aviation hub,” Shukor Yusof, head of aviation consultancy Endau Analytics, said in a blog. 

SIA has said it will cut capacity by 96%, ground almost its entire fleet and impose cost cuts affecting about 10,000 staff in what it called the “greatest challenge” it had ever faced. 

The airline said it would issue S$5.3 billion in new shares to current shareholders and also issue 10-year bonds to raise up to a further S$9.7 billion. 

“The size of the rights issue is more than expected, almost double SIA’s current market cap, indicating the gravity of the situation the airline is facing,” Yusof said. 

In addition, SIA said it had arranged a S$4 billion bridge loan facility with DBS Bank to support the company’s near-term liquidity requirements. 

The rights issue will be offered at S$3 per share, a 53.8% discount to SIA’s last traded price of S$6.5. 

“This transaction will not only tide SIA over a short term financial liquidity challenge, but will position it for growth beyond the pandemic,” said Dilhan Pillay Sandrasegara, CEO of Temasek International. 

SIA said it would use the funding from the rights issues to beef up its capital and operational expenditure needs. 

On Thursday, the Singapore government announced more than $30 billion in new measures to help businesses and households brace against the pandemic. 

Finance minister Heng Swee Keat had also said that SIA would announce support from Temasek and that he welcomed Temasek’s decision to support the airline. 

Qantas Airways (QAN.AX) this week secured A$1.05 billion ($636.1 million) against its aircraft fleet.

Reuters | SINGAPORE

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