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Air China scraps 1b yuan share sale

Trading in Hong Kong resumes today as Beijing carrier seeks other sources to raise money

PUBLISHED : Wednesday, 24 October, 2012, 12:00am
UPDATED : Wednesday, 24 October, 2012, 4:01am

Shares in Air China will resume trading in Hong Kong today after the carrier scrapped a 1.05 billion yuan (HK$1.3 billion) share sale plan to its parent.

Air China's shares rose as much as 3 per cent in Shanghai yesterday before closing at 4.92 yuan, down 1 per cent.

Trading in the Beijing-based carrier has been suspended in Hong Kong since October 9, pending announcement of price-sensitive information related to the previously planned share sale to Air China Group.

Sources close to the company said the carrier would now tap alternative funding sources such as bonds to raise money for capital expenditure next year. The airline is to take delivery of 56 new aircraft, amounting to 26 billion yuan, in 2013.

Reuters' IFR on Friday reported that the carrier was poised to issue 5 billion yuan in bonds and 6 billion yuan in medium-term notes.

"The unexpected termination of the share sale plan is disappointing to the market," Credit Suisse transport analyst Davin Wu said in a report yesterday.

Air China did not explain why it scrapped the plan to sell shares. Its peers, including China Eastern Airlines and China Southern Airlines, meanwhile, have plans to issue shares to their parents in return for capital injection of around 2 billion yuan each.

Wu suspects the share sale plan fell through after disagreements between Air China and the regulator over the issue price. In July, the company lowered the issue price to 5.45 yuan apiece from 5.57 yuan. But he expects Air China to revive the plan early next year.

Air China will release its third-quarter results on October 30. Analysts expect the operating figures will surprise the market on the upside, given the robust summer traffic and an appreciation in the yuan.

In the first nine months of the year, the carrier flew 37.2 million passengers, up 0.7 per cent year on year, while cargo volume dropped 0.9 per cent to 849,278 tonnes.

Shares in Air China last traded at HK$5.13 in Hong Kong.

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