China Eastern Airlines bailout raised to $1 bn

China Eastern Airlines bailout raised to $1 bn
AP
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First Published: Tue, Dec 30 2008. 12 00 PM IST
Updated: Tue, Dec 30 2008. 12 00 PM IST
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Shanghai: China Eastern Airlines plans to raise 7 billion yuan ($1 billion) from selling shares to its state-owned parent company more than double the amount originally planned to help it weather a financial crisis.
The Shanghai-based carrier’s shares, which had been suspended pending an announcement late Monday, fell 1.3% to 4.60 yuan Tuesday morning.
The airline earlier said it would receive a 3 billion yuan ($440 million) capital injection from its parent company, China Eastern Air Holding Co. The sale of 1.44 billion Shanghai-traded shares and 1.44 billion Hong Kong-traded shares in the carrier will more than double the size of the bailout.
The money raised will be used to increase the company’s cash balances.
“The outlook for China’s aviation industry due to the global recession is grim, and the company’s operations and finances are under tremendous pressure,” the airline said in a statement.
The Shanghai shares will be sold at a 16.95% discount to their last traded price before the suspension, or 3.87 yuan a share, the airline said in notices to the Hong Kong Stock Exchange and Shanghai Stock Exchange. The Hong Kong shares will sell for 1.29 Hong Kong dollars per share — a 12.1% discount.
China Eastern reported a net loss of 2.34 billion yuan ($342 million) in the first nine months of the year.
The airline said that its net cash flow of 1.66 billion yuan fell far short of the 12.8 billion yuan needed to repay its debts.
The parent company’s stake in the airline will rise to 74.64% from the current 59.67%, it said.
Several major state-run airlines have received cash injections meant to tide them through the financial crisis. China Southern Airlines, which received 3 billion yuan, saw its shares rise 2.4% to 3.40 yuan on Tuesday.
China Eastern has sought, so far unsuccessfully, to sell a strategic stake to help improve its finances and competitiveness. Most recently, state media reports have said the airline is due to be merged with local rival Shanghai Airlines, though the airline has denied those reports.
State-owned carriers tallied losses of 4.2 billion yuan ($613 million) in January-October, and the government has urged them to cancel or defer aircraft purchases until market conditions improve.
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First Published: Tue, Dec 30 2008. 12 00 PM IST