Finance Minister Grant Robertson tells Air New Zealand to push back capital raise

Air New Zealand has deferred its capital raise several times already due to political considerations. Photo / Mark Mitchell

Air New Zealand has delayed its capital raising a day after Finance Minister Grant Robertson met the airline's chair, Dame Therese Walsh.

The airline, 51 per cent owned by the Government, was expected to announce it was raising around $1 billion from shareholders when it releases its results at the end of the month.

But this morning the company said it received a letter from the Minister of Finance "outlining his view that the current environment is not sufficiently certain and stable to enable the Crown to provide a firm pre-commitment to support the planned equity raise at this time".

The capital raise has been deferred several times already and a further delay was tipped in the Herald earlier this month.

Air New Zealand said it now expects to raise capital in the first quarter of 2022.

Yesterday, the Government provided its plan to reconnect New Zealanders to the world in relation to COVID-19. This included updated vaccination rollout plans, a phased approach to reopening borders and from the first quarter of calendar 2022, a phased introduction of an individual riskbased approach to border settings that will establish various pathways of entry into the country.

The letter from Robertson came after that.

''In this context, the company has, in consultation with the Crown, decided to further defer its planned capital raise until the first available window in the first quarter of calendar year 2022,'' the airline said this morning.

I told the NZX that given the critical role that the airline has in New Zealand's economy and society, the Crown has again confirmed its longstanding commitment to maintaining a majority shareholding in Air New Zealand.

''Subject to Cabinet being satisfied with the terms of the Company's proposed capital
raise at the relevant time, the Crown has again confirmed that it will participate in an equity capital raise by purchasing the number of new shares necessary to maintain a majority shareholding.''

Analysts have suggested the company may need to raise more than $1 billion and the airline said that on completion of the recapitalisation, it expects to repay all amounts drawn under the $1.5 billion Crown Standby Facility.

The Government and the airline have also negotiated new terms for nterest rates on drawings on the facility.

Rates on the two tranches were due to step up 1 per cent after October 29 but this will no longer apply.

This means that from that date the margin applicable to drawings under Tranche 1 will
remain at 2.50 per cent and for Tranche 2 will remain at 4.00 per cent.

The line fee payable on the Crown
Standby Facility will remain at 1.00 per cent and this will result in an all-in total interest rate of 4.20 per cent for Tranche 1 and 5.70 per cent for Tranche 2 (incorporating the same Bank Bill Benchmark rate of around 0.70%).

The airline said this change had been negotiated on an arm's length basis with each party having been independently advised.

The Crown loan continues to be available through to September 2023 and the ailine expects to tap into it further at the end of this month.

The airline told the NZX earlier this month it expects losses before other significant items and taxation of up to $530 million for the 2022 financial year, up from guidance of up to $450m announced in mid-June.

Shane Solly, a director and portfolio manager for investment management company Harbour Asset Management, said early this month the capital raise was at risk of being delayed.

"It is not illogical [to delay], given what is happening. It's one of those ones where you've got to watch the vapour trails and they're telling me that they're doing the best with the hand they've been dealt but that hand is not looking great still."