Hainan Airlines plans to issue up to 2.8 billion non-tradeable shares to finance its expansion and debt problems, according to an announcement to the Shanghai Stock Exchange yesterday.
The airline, which has A and B shares on the Shanghai bourse, could raise about US$900 million as it plans to price its placement at an average of up to 90 per cent of its A-share closing price in the 20 trading days before the issue.
The A share's price on Friday last week fell 0.3 per cent to 3.06 yuan, which translates to 7.7 billion yuan if 2.8 billion shares were sold.
Hainan Airlines will seek approval of the share issue in an extraordinary shareholders' meeting on May 24. It will issue the shares within a year of approval.
United States financier George Soros is the biggest shareholder in the airline, with a 14.8 per cent stake.
The company plans to use the funds to buy out minority stakes in three subsidiary carriers - Xinhua Airlines, Changan Airlines and Shanxi Airlines. The funds will also be used to buy aircraft, repay bank loans and increase working capital.
'Sars [in 2003] depleted the company's net assets, greatly raised its debt to asset ratio, resulting in high financing costs and leaving little room for financing,' the airline said.