Air China to raise USD954 million through share sale

Air China announced plans to raise approximately CNY6.5 billion (USD954 million) through a share sale. Details include:

• 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% as compared to the closing price prior to the suspension of share trading on 26-Feb-2010) to as many as ten investors, including controlling shareholder, China National Aviation Holding Co;
• 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);
• Purpose of exercise: 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 4.58 ppts to 71.8% and, if all funds were used to repay debt, its interest expenses would reduce by CNY345 million p/a;
• 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 Public H shares at 16.33% and Public A shares at 15.33% (down from 17.31% and 12.77%, respectively).
• Share resumption: Shares of Air China will resume trading in Hong Kong today, after being suspended on 25-Feb-2010;
• Government subsidies: Air China's state-controlled parent was granted CNY1.5 billion yuan of government funds, as part of an industrywide bailout to help carriers reduce debts. China Southern Airlines, earlier this week, announced plans to raise as much as CNY10.75 billion in a similar state-backed share sale, while China Eastern raised CNY12 billion through a share sale last year, with the carrier this week stating it requires a further capital injection to reduce its debt-to-asset ratio. [more]

Air China: "Thanks to the revival of the air transportation industry of China and the Company's own competitive strengths, the Company saw a significant improvement in its operations in 2009 as compared to 2008. Considering the industry's and the Company's development trend, the Company has set out plans for aircraft purchase to enhance the traffic capacity of its fleet and capitalize the development opportunities of the air transportation industry of China. The acquisition of aircraft, however, entails huge capital expenditures, and thus puts big pressure on the Company's funding effort and increases its financial risks. Therefore, the Company needs to increase its capital to optimise its financial structure and boost its core competitiveness so that it could maintain its leading position in the industry," Company Statement, 11-Mar-2010.