Singapore Airlines announces 7Y USD notes at CT7 + 210bps IPG

The senior unsecured USD notes are priced under the issuer’s Multi-Currency Medium Term Note Programme. Taking reference to the latest market rates, the senior unsecured USD notes have an IPG of CT7 + 210bps (estimated yield: 3.778%). The tenor of the notes will be 7 years and the use of proceeds for the new issue will be used for aircraft purchases, other aircraft related payments, general corporate or working capital purposes, including the refinancing of existing borrowings of the issuer. The new bonds will be issued by SIA and will be unrated.  

SIA is the flag carrier airline of Singapore and is founded in 1947. Its largest shareholder is Temasek Holdings which holds 55.7% of SIA’s total share interest. SIA is listed on the SGX under the ticker, C6L, and has a market capitalisation of SGD 15.0b as of 12 January 2022.

For the 6 months ended 30 September 2021 (“1HFY21/22”), revenue increased by 73.0% year-on-year (“YoY”) to SGD 2,826.9m. Total expenditure improved slightly from SGD 3,497.3m in 1HFY20/21 to SGD 3,446.3m in 1HFY21/22. SIA reported a net loss for the half but managed to cut down its net loss by 75.9% YoY to a net loss of SGD 836.8m.

Total borrowings for 1H21/22 was SGD 11,400m with SGD 12,529.6m in cash and bank balances. About SGD 600m of borrowings are to be repaid within one year while SGD 10,800m are to be repaid after one year. SIA’s debt to equity ratio for 1HFY21/22 was 0.69x, a significant improvement from 2HFY20/21 where debt to equity was 0.90x.

SIA continued to raise additional liquidity throughout the pandemic, raising a total of SGD 21,600m of additional liquidity since 1 April 2020. This was done through a rights issue of shares and mandatory convertible bonds, aircraft secured financing and through the issuance of bonds. SIA has around SGD 2,100m of untapped lines of credit from renewed existing and new committed lines of credit.

The new issue has an initial price guidance of CT7 + 210bps (estimated yield: 3.778%) with a tenor of 7 years. We think that the new issue is attractively priced at its IPG when compared to notes on the SIA yield curve. The new issue provides a ~ 90bps pick up over the SIASP 3.130% 23Aug2027 Corp (SGD) (YTW: 2.818%). This new issue is suitable for stable income seekers and investors should note that its final price guidance may not be as high as its initial price guidance.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position and the analyst who produced this report holds a NIL position in the abovementioned securities.