SINGAPORE Airlines' (SIA) mandatory convertible bonds (MCBs) to raise an additional S$6.2 billion may be a better play on the national carrier's recovery than its shares.

Phillip Securities said on Friday that gains from the MCBs trading on the exchange may be magnified more than the share price of ordinary SIA shares, given the MCBs' derivative nature and lower price. That being said, SIA may choose to redeem the MCBs early at a fixed price.

For equity investors looking for capital gains, the MCBs can be used as a leverage to SIA's potential share-price recovery, analyst Timothy Ang said in a research note.

However, the bond structure may not appeal to bondholders because of its zero coupon and unfixed yield to maturity, he noted.

Existing SIA shareholders are entitled to 209 rights 2021 MCBs for every 100 SIA shares they owned before May 27. The issue price is S$1 for every 2021 MCB.

The MCBs will convert into SIA shares upon maturity in nine years at a conversion price of S$4.84 per share, with a final accreted principal amount of S$1.69797. This translates to a cost per share of S$2.85 when the MCBs are converted into SIA shares.

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On June 1, SIA said it expects the S$6.2 billion to be raised from the MCB issuance to last it through to the financial year ending March 2023, in response to a string of questions from investor watchdog Securities Investors Association (Singapore) or Sias.

Sias had quizzed the flag carrier on various aspects, including whether the group, majority-owned by state investor Temasek, would be privatised and the circumstances surrounding the impending issuance of MCBs.

Shares of SIA closed down S$0.03 or 0.6 per cent to S$4.90 on Friday.