Focus: Air New Zealand continues to make radical cuts, this time to it’s domestic destinations from Friday flying to only five NZ cities.
Auckland International Airport is seeking to raise around $1.2 billion from new and existing shareholders, as it prepares to cope with a prolonged hit from Covid-19.
This morning New Zealand's largest airport told the NZX it was undertaking a $1 billion, fully underwritten, share placement as well as a $200million share purchase plan "to reinforce its balance sheet and ensure it remains well capitalised during this period of strict border controls and significantly reduced passenger numbers" during Covid-19.
Its shares have been placed in a trading halt of up to two days "to facilitate an orderly market for its securities while it is undertaking the placement component of an equity raising", a notice from the NZX said.
Shares are being offered to investors at a minimum $4.50 each, around an 11 per cent discount to the $5.04 Auckland Airport closed at on Friday, the company said.
In a note to clients sent out on Monday, Craigs Investment Partners said the fundraising would leave Auckland Airport withliquidity which was "sufficient to comfortably see them through the Covid-19 dislocation".
"Auckland Airport has moved swiftly to respond to the abrupt changes in the market and our first priority has been to ensure the ongoing safety and security of our operation," chairman Patrick Strange said.
"The outbreak of Covid-19 has changed travel and trade markets virtually overnight, and like many organisations, our business has been materially impacted. Auckland Airport will have a critical role to play in New Zealand's long-term recovery, and we need to act now to secure our future."
The airport acknowledged its banks had given it significant support in recent weeks "including covenant waivers from its banking group and extensions to all bank facilities due to mature before 31 December 2021". The airport added that relief from its banking covenants "is conditional on the equity raising".
Auckland Council owns just under 22 per cent of the airport's shares. A spokeswoman said the council had not had enough time to decide whether to take part in the fundraising.
"It is too early for council to confirm whether we will participate in this proposal by Auckland Airport," the spokeswoman said.
"We learned of the proposal this morning and will need to quickly assess it before making further comment."
If the council does not participate in the fundraising at all, its shareholding will be diluted, probably to around 18 per cent.
The share placement is being conducted through a bookbuild process at which investors who are invited to take part bid for blocks of shares at different prices. If demand is not sufficient for the organisers to sell the shares for at least $4.50 the underwriters, believed to be Citi, Credit Suisse and Jarden, will take the shares themselves.
Retail investors will not be able to take part in the placement, but Auckland Airport said its existing shareholders which have a registered address in New Zealand or Australia would be able to take part in a share purchase plan of up to $200m.
This would entitle them to subscribe for up to $50,000 worth of shares, at either the placement price, or a 2.5 per cent discount to the average price the shares trade at over the last five days of the programme, whichever is lowe.
More details of the plan are expected to be announced on Thursday.
"Auckland Airport considers that the SPP will cater for a high majority of Auckland Airport's non institutional shareholders, enabling them to participate and potentially increase their relative percentage holdings in Auckland Airport."
The sudden downturn in revenue for the entire aviation sector has forced all of New Zealand's airports to undertake significant cost-cutting exercises, including delaying all capital spending that can be avoided.
Today, Auckland Airport said it "remains committed to completing a number of infrastructure projects focused on essential safety, asset replacement, maintenance and resiliency, including the planned runway pavement replacement".
Chief executive Adrian Littlewood said Covid-19 would have a significant impact on the airport through the current border restrictions and during the recovery.
"Auckland Airport has been serving New Zealand for more than 50 years and we will be here for many more years to come," Littlewood said.
"We provide critical infrastructure to support New Zealand's economic growth and we look forward to making a strong contribution to our nation's long-term recovery. But for now, our focus has to be on the near term. We are wasting no time in taking necessary steps to ensure our organisation remains resilient throughout this crisis and emerges in a strong position once the trading environment improves."
Measures to cut costs included a review of spending with external consultants, a cut in the number of external contractors, cut board and executive pay by 20 per cent, put most staff on four day weeks, suspended bonuses and reduced operations "in line with the new operating environment".
