In anticipation of NZ’s borders reopening to Australia on April 13, and to the rest of the world in May, the country’s beleaguered national carrier, Air NZ (ASX: AIZ) is planning to strengthen its balance sheet via a $1 bn-plus equity recapitalisation.
While the airline stands to benefit from a long-awaited covid recovery narrative, management is expected to give a pending rights issue an added nudge by offering a hefty discount to the last close.
Market whispers suggest the company’s share are to be sold at a 35% discount.
This is the airline’s third crack at a raising funds after two failed attempts last year due to bad timing.
Not unlike big-covid recapitalisation deals on this side of the Tasman, including Sydney Airport, Qantas Airways (ASX: QAN), Webjet (ASX: WEB) and Flight Centre (ASX: FLT) the rights issue is expected to at a near one-for-one ratio.
While Air NZ CEO Greg Foran has called a press conference for 6.30pm [Auckland time] tonight, it’s understood the deal will firstly target the airline’s shareholders, and then Kiwi retail investors and institutions globally.
The deal is expected to be sub-underwritten by Australian and offshore funds on Wednesday night.
At the half year Air NZ reported a statutory loss before tax of $376m, with dividends remaining on hold.
Today’s announced fund raising follows the lifeline thrown to the airline in March 2021, after the Kiwi government extended its loan facility by $600m to $1.5 bn, which also included loan terms being extended to September 2023.
Adding to the rapid fall in the airline’s share price [of around $3] since January 2020 is the overhang endured by shareholders with the NZ government remaining a major shareholder in the national carrier.
The airline’s shares fell 0.78% to $1.28 before enter a trading halt today and are expected to resume trading tomorrow pending an announcement.
Despite NZ’s border reopening, Macquarie warns investors not to expect a quick capacity rebound for the Kiwi carrier.
While Macquarie suspects there could be a healthy time lag before bookings rebound, the broker does expect a profitable period for the airline among limited competition.
Meantime, the broker retains a Underperform rating with the target price increasing to NZ$1.15 from NZ$1.10.
Air NZ share price over three months.
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