Fiji Airways, the national airline of Fiji, was compelled to issue additional shares at a significantly reduced price of $4.22 per share due to the unpredictable market conditions brought on by the COVID-19 pandemic. According to its latest annual report presented in Parliament earlier this month, this price reflects a 74 percent discount compared to the airline’s share price at the end of 2019. The capital raise was essential to help the airline navigate a drastic revenue decline from $1 billion to nearly zero, limited cash flow, a recurring monthly fixed cost of $39 million, and uncertainty surrounding border closures and the resumption of travel demand.
When existing shareholders, excluding the Fiji Government, opted not to participate in the share issuance, portions of the newly offered shares were acquired by the Fiji National Provident Fund and the Unit Trust of Fiji. The airline noted in its report that it faced significant challenges as financiers were doubtful about its survival through the pandemic.
Fiji Airways utilized the expertise of BNP Paribas, a French bank specializing in aviation financing, to create a seven-year financial model that included monthly income statements, cash flows, and balance sheets. This model was critical in determining the airline’s capacity to meet its debt obligations and the types of funding required, along with any necessary restructuring of existing debts. It served as a vital tool that illustrated the airline’s ability to manage debt under various scenarios related to the reopening of borders and the resumption of operations, with over 30 different scenarios evaluated for potential financiers.
Through these efforts, the airline successfully raised $561.4 million via a Sovereign Government Debt Guarantee to strengthen its cash reserves. To remain operational, Fiji Airways implemented significant financing and solvency measures, including deferring aircraft lease rentals, securing new loans exceeding $380 million from the Asian Development Bank, and arranging domestic loans with longer repayment terms.
In August 2021, the company’s shareholders approved a capital raise of $200 million through the issuance of up to 47,393,365 ordinary shares at the heavily discounted price of $4.22 per share. The Republic of Fiji participated in this capital raising in October 2021, contributing $101.9 million for 24,170,428 new shares. However, the majority of existing shareholders chose not to partake, leading the board to offer the remaining shares to the Fiji National Provident Fund and Unit Trust of Fiji.
By June 2022, the Fiji National Provident Fund bought 22,061,790 ordinary shares, representing 30.02 percent of the total shares issued, for $93.1 million, while the Unit Trust of Fiji acquired 1,161,147 ordinary shares, equating to 1.58 percent of the total, for $4.9 million.