China Southern plans to raise US$1.57 billion

3/10/2010 11:58:00 AM

China Southern Airlines plans to raise up to CNY10.75 billion (US$1.57 billion) in a private offering to repay bank loans and boosts its working capital. According to reports, the company will issue up to CNY1.77 billion ‘A’ shares at a minimum price of CNY5.66 each to 10 institutions, including its parent company, China Southern Air Holding Co. The announcement was made in a statement to the Shanghai Stock Exchange. Guangzhou-based China Southern will also issue up to 312.5 million ‘H’ shares at a minimum of HK$2.73 (US$0.35) to Nan Lung Holding Ltd, a subsidiary of its parent company. China Southern Airlines was reported saying that it would use the proceeds from the share sale to repay bank loans totalling CNY4.8 billion and US$1.35 billion.

“The board believes that the subscription can… lighten the debt burden of the company, and enhance the overall benefits,” the airline statement said. “We have carried out measures, such as optimising flight network and adjusting flights, to improve our profitability, but the high debt ratio hindered our development,” it added. The carrier’s debt ratio will be reduced to 74.12% from 85.73% after the injection, a Shanghai Daily report stated. China Southern Holding Company will hold 51.5% of the airline after the share sales; down from the previous 59%.

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