Air NZ taps $72.5mn of gov’t loan, to raise capital in 2021

Air New Zealand (NZ, Auckland Int’l) has started to draw down on a NZD900 million New Zealand dollar (USD593 million) government debt facility while it continues to evaluate how the coronavirus pandemic will affect its operations and capital structure. It estimates that it will complete a “strategic capital structure review” by early next year and then conclude a measure to raise equity capital by June 2021, it outlined in a statement on September 25. On September 29, during the airline’s webcast annual meeting, the company’s chairwoman, Therese Walsh, put a figure on the amount of the state facility accessed so far. “This loan was negotiated on an arm’s length basis, for a term of two years. We have recently drawn down on a portion of the loan and will continue to draw incremental amounts on an as-needed basis to ensure we are not paying more interest than necessary,” she said. “Since we announced the annual financial results in August, we have incrementally drawn down NZD110 million [USD72.5 million] of the NZD900 million standby loan facility,” she added. Reiterating that the company expects to post a second consecutive annual loss for the year ending June 30, 2021, she warned that “with the outlook for future passenger demand clearly uncertain […] we know that Air New Zealand will continue to be a smaller business for some time to come.” Air New Zealand now has just over NZD1 billion (USD659 million) of liquidity, Walsh said, comprising NZD215 million (USD142 million) in cash on hand and NZD790 million (USD521 million) remaining on the government loan facility. It expects to continue to burn through NZD65 million to NZD85 million (USD43-56 million) of cash a month under current conditions. The airline assured in its statement on September 25 that the New Zealand government “has recently reaffirmed its commitment to maintaining its majority shareholding” and that the board “is engaging constructively” with the government about its capital structure and funding. The loan, which has interest rates of 7-9% and is secured with many of Air New Zealand’s aircraft, gives the government the right to request repayment through capital raising measures after six months or convert the loan to equity.