Air New Zealand is delaying its capital raise, as the Government increases the $950 million loan facility it made available to the airline in March last year, to $1.5 billion.
Air New Zealand now says the capital raise will be done by September 31. It was initially due to be complete by June. The airline said the deferral would give it more time to “assess the impacts of recent developments on the airline’s path to recovery”.
Finance Minister Grant Robertson said the Crown wants to remain a majority shareholder and will participate in the raise, subject to Cabinet approval of the terms. The Crown has a 52% shareholding in Air New Zealand.
As for the loan, its term has been extended by 16 months to August 27, 2023, and the interest rate reduced to “reflect current market conditions”.
The rate on the first tranche of the loan has been cut from between 7% and 8% to 3.8%, while the rate on the second tranche has been cut from 9% to 5.3%.
Robertson said: “The Crown Standby Loan Facility agreed in March 2020 was a measure that provided the time for Air New Zealand to reposition its operations and facilitate the implementation of an optimal long-term capital structure.
“The amended loan agreement retains this expectation and the provision of the conversion of the loan to equity at the request of the Crown.
“Air New Zealand’s intention is that all amounts outstanding under the facility will be repaid from the proceeds of its proposed capital raise.”
Air New Zealand Chairwoman Therese Walsh confirmed: "All amounts outstanding under the loan will be repaid from the proceeds of the proposed capital raise.
“The Board expects the final capital raise structure to be a mix of debt and equity…
“We’ve seen some clearing of COVID-19 clouds recently, with the extension of the airfreight capacity scheme, the rollout of the vaccine and the opening of the trans-Tasman bubble on 19 April.
"These developments are good news and fundamental to Air New Zealand’s return to success, but the storm hasn't cleared yet. We have suspended our cash burn guidance while we take the time to see how these events might impact our outlook."
Robertson said: “The Crown’s role as majority shareholder has been a major source of stability for the national airline during a very difficult time.
“As a result, our national carrier is in a much stronger position than many airlines around the world. We need that strength to be retained because we need a national airline to support economic development and provide access to international markets, and to enable the international tourism we’re beginning to see emerge with the opening of the trans-Tasman bubble.
“We also need a national airline to provide a domestic network that allows people to be where they want to be across New Zealand and gets goods where they are needed."