China Southern Airlines to raise 1.6 billion dollars

China Southern Airlines, the nation’s biggest carrier by fleet size, said yesterday it plans to raise 10.75 billion yuan (1.6 billion dollars) to repay bank loans and replenish its capital.
The company will issue up to 1.77 billion yuan-denominated A-shares at a minimum price of 5.66 yuan each to 10 institutions including its parent in a private placement, it said in statements to the Shanghai Stock Exchange.
China Southern will also issue up to 312.5 million H-shares at a minimum of 2.73 Hong Kong dollars (35 US cents) to Nan Lung Holding Ltd, a subsidiary of its parent China Southern Air Holding Company, it said.
State-owned China Southern Air Holding Company and its Nan Lung Holdings unit will jointly subscribe to new shares worth at least 1.5 billion yuan -- the amount of aid China’s finance ministry awarded the airline’s parent.
China Southern said it would use the proceeds from the private placement to pay back bank loans totalling 4.8 billion yuan and 1.35 billion dollars.
The repayment is expected to lower its debt-to-assets ratio and cut its financing costs such as interest.
The share placement will help the carrier “allocate and fully utilise their existing assets... [and] lighten the debt burden of the company,” it said.
The government has injected nearly 20 billion dollars into the nation’s top three carriers including China Southern since late 2008 to help them weather the slowing travel demand amid the global financial crisis.
The carriers have also benefited from a recovery in air travel traffic spurred by the country’s resilience during the crisis – the world’s third-largest economy expanded by a red-hot 8.7 percent last year.
Shares of China Southern, which had been suspended since February 23, ended up 3.5 percent at 6.85 yuan from the previous close of 6.62 yuan as trading resumed yesterday.