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 the airline’s latest annual report, presented to Parliament earlier this month, this price reflects a 74% discount compared to share prices at the end of 2019. The share issuance was part of a broader strategy to raise capital in light of a drastic revenue decline from $1 billion to nearly zero, alongside limited cash reserves and fixed monthly costs of $39 million amid uncertainties surrounding border closures and the recovery of travel demand.
The newly issued shares were purchased by the Fiji National Provident Fund and the Unit Trust of Fiji after other existing shareholders, excluding the Fiji Government, chose not to invest. The airline recognized the challenges it faced, as financiers were uncertain about its survival through the pandemic. With the assistance of BNP Paribas, a French bank specializing in aviation financing, Fiji Airways created a seven-year financial model that included monthly income statements, cash flows, and balance sheets.
This model proved vital in assessing the airline’s capacity to meet its debt obligations, determining necessary funding types, and identifying required modifications for existing debts. Over 30 different scenarios were developed for potential financiers to illustrate the airline’s ability to repay debt under various circumstances of border reopenings and operational adjustments. This effort was instrumental in securing $561.4 million for the airline through a Sovereign Government Debt Guarantee to enhance its cash reserves.
To maintain operations, Fiji Airways implemented critical financing and solvency measures, which consisted of deferring aircraft lease rentals and securing over $380 million in new loans from the Asian Development Bank, as well as domestic loans with extended repayment terms and deferral of capital repayments for four years. The company also raised capital through share issuance.
On August 16, 2021, shareholders approved an equity capital raise of F$200 million by issuing up to 47,393,365 ordinary shares at F$4.22 each, a 74% discount from 2019 share prices. In October of the same year, the Republic of Fiji contributed F$101.9 million in new equity for 24,170,428 shares. However, other existing shareholders opted out of participation, prompting the board to offer the remaining shares to the Fiji National Provident Fund and the Unit Trust of Fiji.
In June 2022, the Fiji National Provident Fund acquired 22,061,790 ordinary shares, representing 30.02% of the total shares issued, for F$93.1 million, while the Unit Trust of Fiji obtained 1,161,147 shares, equating to 1.58% of total shares, for F$4.9 million.