Ahead of Singapore Airlines EGM, Sias raises questions about cash call

Singapore

THE Securities Investors Association (Singapore) or Sias has released a list of questions for Singapore Airlines (SIA) to address before the national carrier's April 30 extraordinary general meeting (EGM) on its proposed S$15 billion debt and equity capital raising.

The airline last month announced the massive cash call to tide it over the coronavirus pandemic that has decimated global air travel. One part of it is a proposed S$8.8 billion renounceable rights issue. This comprises a three-for-two issue of up to 1.78 billion shares to raise S$5.3 billion and an offering of up to S$3.5 billion in 10-year mandatory convertible bonds (MCBs).

The other component is an additional issue of up to S$6.2 billion in additional MCBs to be offered to shareholders via one or more rights issues down the line.

For the S$8.8 billion rights issue, Sias has asked why a large portion of it - 38 per cent or S$3.3 billion - will be used for capital expenditure purposes.

In a letter addressed to SIA chief executive Goh Choon Phong on Tuesday, Sias also requested that the company explain why it is raising such a large amount in its cash call.

As for the rights issue price of S$3 per share, Sias asked how this figure was determined, and whether the discount - of 53.8 per cent to SIA's March 25 closing price of S$6.50 - is in line with market levels.

Sias also questioned why the carrier chose to raise cash from shareholders, and whether it has explored other means of funding such as taking out loans from banks.

Other questions involve the rationale behind the MCBs' conversion price of S$4.84, the differences in yield depending on when the MCBs are redeemed, the conduct of the EGM to ensure it is accessible to all shareholders, and how the airline plans to improve its operational performance to shore up its stock price in light of the Covid-19 crisis.

The carrier's shares closed at S$6.01 on Tuesday, down S$0.22 or 3.5 per cent.