Fiji Airways, the national airline of Fiji, was compelled to issue new shares at a significantly reduced price of $4.22 per share due to the uncertain market conditions stemming from the COVID-19 pandemic. According to the airline’s recent annual report submitted to Parliament, this price represents a 74 percent decrease from the share price at the end of 2019. This measure was part of a capital raising initiative designed to help the airline remain operational amid a dramatic decrease in revenue, which plummeted from $1 billion to nearly zero. Additionally, the airline faced a recurring monthly fixed cost of $39 million and uncertainties regarding when border closures would end and travel demand would return.
Some of the newly issued shares were acquired by the Fiji National Provident Fund and the Unit Trust of Fiji after other existing shareholders, aside from the Fiji Government, opted not to participate. The airline noted in its annual report that it encountered significant challenges in securing financing, as many financiers were doubtful about the airline’s survival amid the pandemic.
Fiji Airways collaborated with BNP Paribas, a French bank with expertise in aviation financing, to create a seven-year financial model that outlined monthly income statements, cash flows, and balance sheets. This model was pivotal in assessing the airline’s ability to meet its debt obligations and identify necessary funding methods and re-profiling of existing debts. It demonstrated the airline’s capacity to repay debt based on various scenarios regarding the reopening of borders and the resumption of operations, leading to the development of over 30 scenarios for financiers.
This strategic approach helped the airline secure $561.4 million through a Sovereign Government Debt Guarantee, which bolstered its cash reserves. To maintain operations, Fiji Airways also implemented key financing and solvency measures, including deferrals on aircraft lease rentals and securing more than $380 million in new loan facilities from the Asian Development Bank, alongside domestic loans with extended repayment periods and capital repayment deferrals for four years.
On August 16, 2021, shareholders approved an equity capital raise of 200 million Fijian dollars through the issuance of up to 47,393,365 ordinary shares at a price of 4.22 Fijian dollars per share, reflecting a 74 percent discount from the 2019 share price. In October of that year, the government of Fiji contributed 101.9 million Fijian dollars in the capital raise, acquiring 24,170,428 new ordinary shares. The remaining existing shareholders chose not to partake in the capital raise, prompting the board to offer the leftover shares to the Fiji National Provident Fund and the Unit Trust of Fiji.
By June 2022, the Fiji National Provident Fund had acquired 22,061,790 ordinary shares, amounting to 30.02 percent of total ordinary shares, for 93.1 million Fijian dollars, while the Unit Trust of Fiji purchased 1,161,147 ordinary shares, representing 1.58 percent of the total, for 4.9 million Fijian dollars.