Tiger Airways, which is currently one-third owned by Singapore Airlines, has announced that it plans to raise about S$297 million ($238 million) through a rights issue and a preferential offering of perpetual convertible securities.
It plans to use the proceeds mainly to fund its growing operations in Singapore and joint ventures in Indonesia and the Philippines, to repay existing debt and to strengthen its financial position, Tiger Airways said in a statement that was filed to the Singapore Exchange early yesterday.
The airline said it expects the fundraising will be completed by May, and it will be subject to shareholders’ approval at an extraordinary general meeting on March 22.
“We have a strong leadership position in Singapore and have invested in two fast-growing markets, namely Indonesia and the Philippines,” Koay Peng Yen, group CEO of Tiger Airways, said in the statement.
“The proceeds from the fundraising exercise will allow us to fortify our balance sheet and be well-positioned to grow the Tiger franchise in Asia.”
In the company’s third quarter, ended December 31 last year, Tiger Airways swung to a net profit of S$2 million, from a net loss of S$17.4 million from a year earlier, the company said in its earnings statement in late January, explaining that revenue improved largely due to an increase in passenger traffic and a higher load factor.
However, as the end of the year is traditionally the strongest quarter in the airline industry, the group said it expects to report an operating loss for the financial year. It added that it plans to expand its overall capacity to strengthen its position in the industry.
Tiger Airways’ stock fell 3.5% to S$0.690 after yesterday’s announcement of the fundraising, remaining above the rights issue price. After dropping about 11% from a high in mid-January, the stock is now down 4.2% so far this year.
The Straits Times Index was up 0.3% yesterday, bringing its year-to-date gain to about 2.6%.
Tiger Airways will issue 164.3 million new ordinary shares at S$0.47 for each rights share, set to raise S$77.2 million, according to the statement. The offer price translates into a discount of 34.3% to Monday’s close of S$0.715, and a discount of 30.3% to the theoretical ex-rights price of S$0.674 per Tiger Airways share.
Shareholders are entitled to subscribe for one rights share for every five existing ordinary shares they own in the company.
For the preferential offering of convertible bonds, shareholders are entitled to subscribe for one convertible bond with a denomination of S$1.07 for every four ordinary shares they hold. Each convertible bond confers a right to receive ordinary distributions at the rate of 2% a year for the first five years, which are deferrable at the company’s option, and can be converted at the prevailing conversion price, it said.
The conversion price will be at a premium of 15% above the volume-weighted average price of Tiger Airways’ shares during the five trading days leading up to the price fixing. The transaction is subject to a minimum conversion price of S$0.65 and a maximum conversion price of S$0.90, according to a separate statement by Singapore Airlines.
The estimated gross proceeds from the preferential offering will be S$219.8 million, allowing the company to raise a total of S$297 million with the rights issue.
Singapore Airlines owns 32.7% of the company and has undertaken to subscribe for its respective pro-rata entitlement to the rights shares and convertible securities. It will also subscribe for excess rights shares and convertible securities that are not subscribed for by other shareholders, as long as its shareholding will not exceed 49.9% after the transaction.
“The company is confident of the long-term prospects of Tiger Airways in the low-cost segment of the aviation industry and is committed to its long-term growth,” Singapore Airlines said in the statement.
Temasek-owned Dahlia Investments, which holds a direct 7.3% stake in Tiger Airways, has also undertaken to subscribe for its pro-rata entitlement to the rights shares.
Singapore Airlines and Temasek have committed to up to 84% of the offering, according to Tiger Airways.
Tiger Airways is the parent company of a group of budget carriers operating in Asia and Australia. As of February 28, the group’s fleet comprises 43 Airbus A320 aircraft, averaging under three years of age. The group says it operates an extensive network covering more than 50 destinations across 13 countries in Asia. The group has nearly doubled its capacity during the past four years and is now flying about 6.5 million passengers annually.
Morgan Stanley is the sole financial adviser, lead manager and lead arranger of the rights issue and the preferential offering, and DBS and Standard Chartered join the US bank as underwriters of the rights issue, according to the statement.