Sias raises privatisation idea for SIA; questions S$6.2b MC bond issue

SECURITIES Investors Association (Singapore) or Sias has asked mainboard-listed Singapore Airlines (SIA) if it has considered privatisation or has such an intention.

The investor watchdog has written a letter to the flag-carrier airline, posing a string of questions triggered by SIA's recent announcement of the issuance of mandatory convertible bonds (MCBs) to raise a further S$6.2 billion.

David Gerald, Sias chief executive, who penned the letter dated May 27, has asked on behalf of some shareholders whether  the route of privatisation, like the one taken by land transport operator SMRT, has crossed the mind of SIA's board. He also asked whether SIA has such a plan in mind.

 The airline group was quizzed about how it would balance or align its business interests and those of its shareholders, whom Mr Gerald said are questioning the intention of SIA and the issuance, and "are not sure what they should do about it".

Sias also asked SIA about the factors that led it to decide to issue the MCB this time round, despite tepid response to its first tranche, which was almost entirely mopped up by majority shareholder Temasek, leading to a take-up rate of about 96 per cent.

The investor watchdog further asked how important the issuance is to the airline group in the near- and longer-term, as well as how long the S$6.2 billion proceeds will last.

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"Would there be a need for further fund-raising?" Sias added.

It also probed SIA about the merits of the MCB issuance, why shareholders should subscribe for the bonds - given most investors and directors had let the earlier MCBs lapse - and whether the two tranches are different in their technical aspects.

"What were the lessons learnt from the previous MCB exercise, and what is being done differently this time round?

Sias also flagged that the airline group has raised the proportions of the proceeds from this issuance to be used for capital expenditure and other commitments, vis-a-vis the earlier exercise. This suggests a change in the focus of SIA: it is looking beyond this pandemic to secure its longer-term future.

Sias asked: "Can SIA comment on the thought process behind the allocation of funds? Also, can SIA briefly outline the deployment schedule for the proceeds?"

The investor watchdog noted that SIA has raised S$2 billion from sale-and-leaseback of aircraft, and asked whether the airline group can achieve dual goals of fund-raising and streamlining its asset base using this avenue, or resort to alternative less-dilutive fund-raising means.

SIA shares were trading at S$4.96 or 2.06 per cent higher when market closed on Thursday.

READ MORE:

• SIA may need funds again with slow recovery but it has several options besides tapping MCBs
• Should investors answer SIA's call for more cash?