TIGER Airways plans to raise $S158.6 million ($126m) in a rights issue to fund aircraft purchases and strengthen its balance sheet as the budget carrier recovers from loss of business in Australia, where it was grounded for six weeks on safety concerns.
The airline plans to offer one rights share for every two shares held by its investors, totalling 273.4 million new shares at S58 cents apiece, it said in a statement last night.
Tiger's shareholders -- Singapore Airlines and Temasek Holdings, which collectively own 40.2 per cent of the carrier -- will subscribe to the rights issue. They have also committed to underwrite 90 per cent of the sale, according to the statement.
"The company is undertaking the rights issue to strengthen its balance sheet by increasing equity, therefore reducing leverage and providing the company with financial flexibility to fund its expansion plans," Tiger said.
The issue price represents a discount of approximately 39 per cent to the last traded price of S95.5c per share yesterday, Tiger said in the statement.
Many analysts had said the carrier may need to raise cash to fund its aircraft purchases and bolster its weak balance sheet, which is likely to be further hit by expected losses at its Australian unit.
The company said earlier this month that its Australian unit, which was grounded for nearly six weeks because of safety concerns, is likely to report a loss this financial year and that that will drag down the company's performance.
In a note to investors earlier this month, Citigroup said Tiger's debt level looked high "and we do not rule out more aircraft sales and leasebacks or an outright equity issuance to reduce gearing". It added that the latter move "would be a convenient option for Singapore Airlines to raise its stake in Tiger".
Tiger Airways Australia resumed flights on August 12 with a reduced fleet after the Civil Aviation Safety Authority lifted the flight ban. The airline said the ban had cost Tiger at least $S2m a week.
Tiger Airways reported a net loss of $S20.6m in its first quarter that ended June 30, compared with a net profit of $S1.9m in the same period a year earlier due to high fuel and tax costs and flight disruptions due to volcanic eruptions.
DBS Group Holdings and Standard Chartered have been appointed managers of the issue.
Source: http://www.theaustralian.com.au
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