China Southern Airlines 1.5 billion capital injection is in place to raise additional funds to raise 10 billion

[Maidian.com] On the 8th, China Southern Airlines Co., Ltd. ("China Southern Airlines") announced that it plans to issue non-public offerings of no more than 1.767 billion A-shares at a price of 5.66 yuan/share.

[Maidian.com] On the 8th, China Southern Airlines Co., Ltd. ("China Southern Airlines") announced that it plans to issue non-public offerings of no more than 1.767 billion A shares at a price of 5.66 yuan per share. The total amount of funds raised will not exceed RMB 100. 100 million yuan. And to issue no more than 312.5 million H shares to Nanlong Holdings (a wholly-owned subsidiary of China Southern Airlines Group) for HK$2.73, all of which will be used to repay bank loans. Analysts said that if the successful issuance, China Southern's debt ratio will be greatly reduced.

According to the announcement, China Southern Airlines Group Corporation (China Southern Airlines Group) intends to subscribe for no more than 133 million shares in cash, while China Southern Airlines subscribed for this non-public offering of A shares and Nanlong Holdings to subscribe for this non-public offering. The total amount of shares is not less than 1.5 billion yuan.

This 1.5 billion yuan is the state's financial funds to reserve the last capital injection for aviation companies. Since 2008, the government has prepared 15 billion funds to transfuse blood from the three major airlines.

On the 9th, China Southern Airlines resumed trading in Shanghai and Hong Kong.

The loan balance is still over 10 billion yuan

The private placement is mainly for no more than 10 specific investors including the parent company China Southern Airlines. The reserve price of non-publicly issued A-shares is not less than 90% of the average price of A-shares of China Airlines on the 20 trading days prior to March 9, which is 5.66 yuan/share.

China Southern Airlines said that the purpose of the additional issuance will further increase net assets, reduce asset-liability ratio, improve financial status, and enhance the company's operational capability and risk resistance. After the non-public offering of A shares raised 10 billion yuan to repay bank loans, China Southern's asset-liability ratio will be reduced from 85.73% to 74.93%; meanwhile, non-public offering of H shares of 750 million yuan will be used to repay bank loans. After that, the company's asset-liability ratio will further drop to 74.12%.

As of September 30, 2009, China Southern's total assets were 92.54 billion yuan, total liabilities were 79.337 billion yuan, and the asset-liability ratio reached 85.73%. Although many bank loans provided financial support for the development of China Southern Airlines, high interest rates also diluted the company's operating profit. In 2008, China Southern's interest-bearing liability interest amounted to 2.662 billion yuan, compared with 1.64 billion yuan in January-September 2009, while China Southern Airlines realized a net profit of 322 million yuan.

On the 8th, China Southern Airlines announced that China Southern Airlines had a loan balance of 1.221 billion US dollars and 4.8 billion yuan. The funds remaining after the repayment of these bank loans are used to supplement the company’s liquidity.

China Southern Airlines expansion plan is advancing

In fact, this is not the first time that China Southern has received state funding. An insider of China Southern Airlines revealed that in the past two years, China Southern Airlines has been actively seeking government support to solve the problem of insufficient capital and high debt-to-asset ratio. In 2009, it obtained a national capital injection of 3 billion yuan through the private placement of the parent company China Southern Airlines. He said that through this financing arrangement, China Southern Airlines is expected to significantly reduce its asset-liability ratio and significantly increase its net assets per share, laying the foundation for future development.

In addition, the reporter was informed that while China Southern Airlines is issuing additional shares, the relevant expansion plans are also advancing. On January 20 this year, China Southern Airlines announced that it will purchase 20 A320 series aircraft from Airbus SAS, and at the same time, Air France. The joint international flight is also under negotiation.

The aviation industry said that due to factors such as rigid capital expenditures and sluggish market demand, the Chinese aviation industry has been on the verge of profit and loss. After the financial crisis in 2008, the state's support for subsidies, capital injections, and restructuring of the three major airlines has gradually increased. (Oriental Morning Post)

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