Flush with cash, Singapore Airlines to spend $3.86b redeeming convertible bond

Singapore Airlines Ltd (SIA) said on Tuesday (Oct 25) its strong cash position would allow it to spend $3.86 billion to redeem convertible bonds issued in 2020 that helped it weather the halt in travel during the pandemic.

The airline said in a statement that the bonds, which have a conversion price below the current share price, had become its most expensive form of financing even though interest rates were rising.

The bonds with a principal amount of $3.5 billion were issued as part of a broader $19 billion financial rescue package backed by the airline's majority shareholder, state fund Temasek Holdings.

By June 30 this year, as borders opened and travel demand rebounded, the airline had a cash balance of $16.1 billion. It reported the second highest quarterly operating profit in its history in the June quarter.

The bond redemption, to occur in December at 110.4per cent of the principal amount, will be funded from existing cash reserves, SIA said.

The airline had raised an additional $6.2 billion in liquidity through a separate issue of mandatory convertible bonds in 2021. It has not announced plans to redeem those at this stage.

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