China Southern Airlines plans to issue up to $2.25 billion in A-share convertible bonds

[May 14, 2020]  BEIJING (Reuters) - China Southern Airlines is planning to issue up to 16 billion yuan ($2.25 billion) in A-share convertible bonds to fund purchases of aircraft, maintenance services and spare engines, and to boost cashflows, the carrier said on Thursday.

Convertible debt offers coupons - interest payments - like normal bonds, but also carries the right to convert the debt into shares at a certain price.

The carrier will raise 10.6 billion yuan to buy aircraft, aviation supplies and maintenance programmes, accounting for about half of the total investment the airline needed, it said in a company filing, adding that it is also aiming to raise 600 million yuan to fund purchases of spare engines. The remaining 4.8 billion yuan will be used to boost its capital.

The move came after China Southern reported an almost 300% plunge in its first-quarter net profit due to the impact of the coronavirus pandemic, as the carrier in March reportedly warned about the "extreme difficulties" facing business operations.

Chinese airlines reported a total loss of 33.62 billion yuan ($4.8 billion) in the first quarter as the pandemic shattered travel demand.

Demand, as measured by revenue passenger kilometres, was still down over 70% in March, latest data showed.

(Reporting by Stella Qiu and Brenda Goh, Editing by Alexandra Hudson)

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