Air New Zealand needs $2.2 billion to recover from the pandemic, with the airline planning to raise the funds in a complicated mix of shares and borrowing that will keep the government's majority share.
File image. Photo: camfoto/123RF
Chair Dame Therese Walsh said the time was now right to bolster its balance sheet to repay the loan it received from the government when Covid-19 first emerged.
"While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity recapitalise its balance sheet and repay the loan it received from the Crown during the Covid crisis," Dame Therese said in a statement.
"This is an important step in refuelling for our recovery."
Current shareholders will be offered the right to buy two new shares for every one they currently own at 53 cents each, a 61 percent discount to the airline's last market price of $1.38, which will raise $1.2 billion.
It will also issue $600 million worth of special shares to the government and look to raise a further $400m in debt from the government as back up finance.
The investment banks Citigroup and UBS New Zealand will underwrite the portion of the offer not including the government's participation.
Finance Minister Grant Robertson said the government had pre-committed to participating in the $1.2b equity capital raise by purchasing the number of new shares needed to keep its 51 percent holding, worth up to $602m.
He said a portion of the capital raised would be used to repay loans it received from the government during the pandemic.
"It has been an incredibly challenging time for Air New Zealand over the past two years. We have provided significant support to Air New Zealand to recognise its critical role in keeping the country connected to the rest of the world, including the Crown loan facility which has been drawn down by $850m."
He said the government would also provide the standby loan facility of $400m to ensure financial stability over the next few years.
"While it is not expected to be drawn upon, it is available to Air New Zealand if needed through to 2026. The arrangements for the facility have been benchmarked against equivalent private sector lending to airlines."
Air New Zealand also trimmed its full year loss forecast to $800m from $850.
It said it had recently seen an uptick in sales following the government's plans to open the border.
In its longer term forecast the company said it did not expect to return to profitability until 2025, where it expected to report a bottom line similar to that seen in 2019 of $276m.
The company did not expect to resume paying dividends until the 2026 financial year, but this was also subject to conditions of its new government loan arrangements.
The airline was put on a trading halt on the NZ stock exchange this afternoon ahead of the announcement, which it had promised to make by the end of the month.
Air NZ twice deferred its equity raising last year as borders remained closed because of the pandemic, causing it to post massive losses.