March 9 (Bloomberg) -- China Southern Airlines Co. will resume trading today after announcing plans to raise as much as 10.75 billion yuan ($1.57 billion) through the issue of new shares in Shanghai and Hong Kong to repay its debts.
The airline, which expects to return to profit in 2009, will use the proceeds to help repay 14 billion yuan of outstanding bank loans that mature by the end of next year, according to a filing to the Hong Kong stock exchange late yesterday. The company had 60 billion yuan of net debt at the end of June, 7.2 times its total equity, according to its first- half earnings report.
China Southern, which ordered 20 Airbus A320 aircraft in January, is seeking money less than a year after receiving a 3 billion yuan cash injection from its state-owned parent. The holding company is in total providing 1.5 billion yuan in this round of fund-raising as part of the final tranche of an industrywide package from the central government to help carriers cut debt and cope with a travel slump.
“The company is actively seeking ways to strengthen its capital base and lessen its debt burden,” China Southern said in the statement. “Given the current financial condition of the group, the directors believe that taking up further borrowings or other bank financing would increase the group’s finance costs and in turn will further deteriorate the group’s financial position.”
The country’s largest carrier will issue as many as 1.77 billion new A shares for at least 5.66 yuan per share to up to 10 investors including parent China Southern Air Holding Co. It will also issue up to 312.5 million new H shares to Nan Lung Holding Ltd., a unit of the parent, for at least HK$2.73, according to the statement.
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China Southern’s shares, which were suspended on Feb. 23 pending the announcement of a cash injection, will resume trading today. The Shanghai-listed A shares rose 4.9 percent to 6.62 yuan the day before trading was halted, and the Hong Kong- listed H shares climbed 9.6 percent to HK$2.98.
The airline posted a 4.8 billion yuan loss in 2008, its first in three years, after natural disasters and a global slowdown sapped air travel. The company said on Jan. 20 it expects to post a profit for 2009 based on an economic recovery in China and overseas and a fall in the cost of fuel.
Chinese airlines boosted passenger numbers 17.6 percent in February to 20 million, Li Jiaxiang, the head of the nation’s aviation regulator, said March 4 in Beijing.
