(Yicai Global) Oct. 31 -- China Southern Airlines, the biggest air carrier in China, plans to raise around CNY20 billion (USD2.8 billion) via a private placement to its controlling shareholder in order to buy 31 new aircraft, repay its debts and replenish working capital.
The Guangzhou province-based firm, listed in Shanghai and Hong Kong, will issue close to 2.5 billion of its mainland-floated shares worth up to CNY16.8 billion to China Southern Air Holding, it said in a statement yesterday. It will spend CNY3.5 billion of this on debt repayments and the rest on new planes.
The airline, China's largest by number of cargo aircraft, routes, and passenger throughput, is asking for the 90 percent of its average Shanghai share price over the 20 trading days prior to the contract commencement date.
China Southern's net profit fell 2.3 percent to CNY4.1 billion in 2018, as revenue jumped 7.1 percent to nearly CNY117 trillion. It transported 140 million passengers the same year, topping the domestic leaderboard for the 40th straight year, and had 840 planes as of the end of December -- but it still relies heavily on leverage.
It had an asset-liability ratio of 73.9 percent, the firm said in the statement, adding that this should fall to 69.7 percent with the incoming money it has earmarked for the cause.
The company also plans to issue up to 613 million Hong Kong-listed shares, worth up to HKD3.5 billion (USD447 million), to China Southern Air Holding's subsidiary Nan Lung Holding. China Southern will use this cash to supplement its working capital and is asking the buyer to match its average Hong Kong share price over the 20 trading days leading up to when the contract begins.
Editor: James Boynton