China Southern Airlines is planning to issue up to RMB 16 billion (USD 2.25 billion) in A-share convertible bonds to fund purchases of aircraft, maintenance services and spare engines, and to boost cashflows, the carrier said on Thursday.
Convertible debt offers coupons - interest payments - like normal bonds, but also carries the right to convert the debt into shares at a certain price.
The carrier will raise RMB 10.6 billion to buy aircraft, aviation supplies and maintenance programmes, accounting for about half of the total investment the airline needed, it said in a company filing, adding that it is also aiming to raise RMB 600 million to fund purchases of spare engines. The remaining RMB 4.8 billion will be used to boost its capital.
The move came after China Southern reported an almost 300% plunge in its first-quarter net profit due to the impact of the coronavirus pandemic, as the carrier in March reportedly warned about the “extreme difficulties” facing business operations.
Chinese airlines reported a total loss of RMB 33.62 billion (USD 4.8 billion) in the first quarter as the pandemic shattered travel demand.
Demand, as measured by revenue passenger kilometres, was still down over 70% in March, latest data showed.
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