Air China confirms details of its USD954 million share issuance plan

Air China confirmed (15-Mar-2010) details of the proposed issuance of new A and H shares, as follows:

• Funds: The net proceeds from the A share issue will be not more than CNY5.6 billion (USD820 million), while the net proceeds from the H shares issue will be no more than HKD1.04 billion (USD134 million);
• A shares: The carrier intends to sell up to 585 million new Shanghai-listed shares (A shares) for at least CNY9.58/share (this represents a discount of approximately 17.70% to the closing price prior to the suspension of trading on 26-Feb-2010) to as many as ten investors, including controlling shareholder, China National Aviation Holding Co, which will commit at least CNY1.5 billion to subscribe in cash for not more than 157 million new A shares. Proceeds from the A share issue will be used toward the company's working capital - CNY1.5 billion is planned to be applied towards acquisitions of minority shareholders' equity interests in Air China Cargo;
• H Shares: The airline will sell as many as 157 million new Hong Kong-listed shares (H shares) to a unit of its parent, for at least HKD6.62/share (representing approximately a 2.22% discount from the previous closing prive on 26-Feb-2010). All proceeds will be used towards the company's working capital expenditure;
• Purpose of exercise: Overall proceeds will be used to "increase the company's capital funds, decrease its debt ratio, improve its financial condition to satisfy the funding requirement of its business development and enhance the company's profitability and bring good returns to its Shareholders". The carrier stated the share sale would reduce its gearing by 4.6 ppts to 71.8% and, if all funds were used to repay debt, its interest expenses would reduce by CNY345 million p/a. The funds will also be acquired to support the purchase of new aircraft to meet increased demand (the carrier plans to add 26 aircraft to its fleet in 2010 and 33 in 2011);
• New ownership structure: CNAHC will have a 39.3% stake in the company (A shares, down from 40.40% currently), CNAHG with hold an 11.98% stake (10.26% A shares and 1.72% H shares, compared to a combined 11.42% currently, comprised of a 10.87% A share holding and a 0.55% H shareholding), Cathay Pacific will have a 17.07% holding (H shares, down from 18.10%, with the carrier confirming it would not participate in the share issue), with Public H shares at 16.33% and Public A shares at 15.33% (down from 17.31% and 12.77%, respectively). [more - Share Issuance Proposal] [more - EGM Notice] [more - Foreign Shareholders Class Meeting Notice]