China Eastern Airlines Corp, the nation's third-largest carrier, more than doubled the financial aid it has secured from the government as the money-losing airline battles to cut debts.
The company will raise a total of 7 billion yuan (US$1.02 billion) by selling shares in China's mainland and Hong Kong to its parent, China Eastern Air Holding Co, and another unit, China Eastern said in a statement to the Shanghai Stock Exchange yesterday.
China Eastern and China Southern Airlines Co, the country's largest carrier, have both won government funding as they struggle to pay back debt from buying planes just as the nation's economic slowdown cuts demand for air travel.
The cash injection may be part of a plan to combine China Eastern and its hometown rival Shanghai Airlines Co, China Securities Co analyst Li Lei said.
"A better financial status will pave the way for the merger," Li told Bloomberg News.
The proceeds of the two share issues, which need approval from shareholders and China Securities Regulatory Commission, will cut the company's debt-to-asset ratio to 90.1 percent from 98.5, the statement said.
The carrier last traded in both cities last Wednesday, pending yesterday's announcement. The stock has lost 83 percent in Hong Kong this year and 78 percent in Shanghai.
The company will issue 1.4 billion yuan-denominated A shares to its state-owned parent, raising 5.56 billion yuan, the statement said. The shares will be issued at 3.87 yuan, up from a previously announced price of 3.60 yuan.
The carrier will raise a further 1.44 billion yuan from selling H shares listed in Hong Kong to CES Global at 1 yuan a share, the statement said.
China Eastern's parent, which received 3 billion yuan earlier this month from the government to help fund its purchase of the A shares, will own 74.6 percent of the listed company's share capital after the placement.
China Southern's parent secured 3 billion yuan of aid last month.
China Eastern, which is heading for its third loss in four years, failed to secure a tie-up with Singapore Airlines Ltd earlier in the year after minority shareholders vetoed the sale of a stake.
The carrier has been seeking a tie-up with Shanghai Airlines since a round of industry-wide consolidation in 2002.
(Shanghai Daily December 30, 2008)
