Air New Zealand has announced a NZ$2.2 billion (US$1.53 billion) recapitalization plan to smooth its way to recovery. The recapitalization involves a pro rata renounceable rights offer of ordinary shares to eligible shareholders to raise NZ$1.2 billion, NZ$600 million of redeemable shares to be issued to the New Zealand Government under an existing subscription agreement, and a new committed unsecured four-year loan of NZ$400 million from the Government.
Leaked Air New Zealand news causes a stock exchange trading halt
News of the recapitalization plan leaked before the official announcement, causing the Australian and New Zealand stock exchanges to temporarily pause trading in Air New Zealand shares on Wednesday. Air New Zealand came out with its formal statement later in the day.
“When COVID struck in early 2020 we took decisive action. Routes were closed, planes parked, and the number of Air New Zealand employees was reduced by almost a third. Almost overnight, passenger numbers halved and flight demand dropped 95%,” said Air New Zealand Chair Dame Therese Walsh on Wednesday. “With New Zealand’s support, and Crown (New Zealand Government) loan funding, we were able to keep the country connected.”
“While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity, recapitalize its balance sheet and repay the loan it received from the Crown during the COVID crisis. This is an important step in refueling for our recovery. The rights offer we are launching today is structured to provide all eligible Air New Zealand shareholders with a fair opportunity to participate.”
Air New Zealand Chair Dame Therese Walsh (speaking). Photo: Getty Images
Air New Zealand shareholders offered two new shares for every share they now own
Under the terms of the $1.2 billion rights offer, existing shareholders will be offered two new shares for every one share they own. The asking price is NZ$0.53 per share, a 61% discount to Air New Zealand’s share price before Wednesday’s trading halt. While the New Zealand Government owns 52% of the country’s flag carrier, a good number of everyday Kiwis do as well.
“The Crown has pre-committed to participating in the $1.2 billion equity capital raise by purchasing the number of new shares necessary to retain its 51 per cent holding, which is worth up to $602 million,” says New Zealand’s Finance Minister Grant Robertson.
Also in Wednesday’s announcement was some updated guidance on Air New Zealand’s anticipated loss in the year to June 30. The airline was flagging a loss in excess of NZ$800 million. Air New Zealand has now updated that figure to less than $800 million.
Air New Zealand does not expect to return to profitability until the 2025/26 financial year. Photo: Getty Images
“COVID isn’t behind us yet. There will still be significant challenges and uncertainties to face, and it will take time to recover, but Air New Zealand is committed to rebuilding a stronger, more nimble airline that delivers for all New Zealanders,” said Dame Walsh.
Beyond June 30, Air New Zealand is flagging losses over the next couple of years until demand, particularly long haul demand, normalizes. During Wednesday’s media briefing, Dame Walsh said the airline did not expect to return to profitability until the 2025/26 financial year.
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