Singapore Airlines obtains $13 billion rescue package amid coronavirus shock

Singapore Airlines said it would cut capacity by 96 percent, ground almost its entire fleet and impose cost cuts affecting about 10,000 staff. (AFP)
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Updated 27 March 2020

Singapore Airlines obtains $13 billion rescue package amid coronavirus shock

  • ‘This is an exceptional time for the SIA Group’
  • SIA said it would use the funding from the rights issues to beef up its capital and operational expenditure needs

SINGAPORE: State investor Temasek Holdings and others put together a funding package of up to S$19 billion ($13.27 billion) for Singapore Airlines (SIA) in the single biggest rescue for an airline slammed by the coronavirus pandemic.
The massive financing plan underscores the depth of financial trouble for the global airline industry, with nearly one-third of the world’s aircraft already grounded because of the pandemic, according to data provider Cirium.
Many governments worldwide have already stepped in to help airlines amid the virus-induced travel slump, with the United States offering $58 billion in aid. Many carriers have grounded fleets and ordered thousands of workers on unpaid leave to keep afloat.
The S$5.3 billion equity and up to S$9.7 billion convertible note portions of the Singapore Airlines fundraising are being underwritten by Temasek, which owns about 55% of the group.
The carrier has also obtained a S$4 billion bridge loan facility with the country’s biggest lender, DBS Group Holdings Ltd, to support near-term liquidity needs until the airline secures money from the rights issue.
“This is an exceptional time for the SIA Group,” SIA Chairman Peter Seah said in a statement late on Thursday.
SIA’s shares went into a rare trading halt earlier Thursday after plunging to their lowest in 22 years this week as investors feared the virus will have a deep impact on the company.
“Under the current dire circumstances, the rights issue is the best tactical move for SIA. It underscores the carrier’s strategic importance to Singapore and the island state’s position as both a financial center and aviation hub,” Shukor Yusof, head of aviation consultancy Endau Analytics, said in a blog post.
SIA has said it would cut capacity by 96 percent, ground almost its entire fleet and impose cost cuts affecting about 10,000 staff amid what it called the “greatest challenge” it had ever faced.
The rights issue will be offered at S$3 per share, a 53.8 percent discount to SIA’s last traded price of S$6.5.
“While the raising looks earnings and valuation decretive, SIA now looks well positioned to ride out the storm with balance sheet concerns largely de-risked,” BofA analysts told clients.
Temasek International Chief Executive Dilhan Pillay Sandrasegara said the deal would not only tide SIA over a short-term liquidity challenge but would position it for growth beyond the pandemic.
SIA said it would use the funding from the rights issues to beef up its capital and operational expenditure needs.
On Thursday, the Singapore government announced more than $30 billion in new measures to help businesses and households brace against the pandemic.
Finance minister Heng Swee Keat had also said that SIA would announce support from Temasek and that he welcomed Temasek’s decision to support the airline.
Qantas Airways this week secured A$1.05 billion ($636.1 million) against its aircraft fleet.


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.