Fiji Airways, the national airline of Fiji, had to issue additional shares at a significantly reduced price of $4.22 each due to the unprecedented market conditions created by the COVID-19 pandemic. In its annual report presented to Parliament earlier this month, the airline highlighted that this price represented a 74% discount compared to the share price at the end of 2019. This move was part of its capital raising strategy aimed at ensuring the company remained operational while dealing with a staggering decline in revenue, which plummeted from $1 billion to nearly zero, coupled with limited cash reserves, fixed monthly costs of $39 million, and uncertainty regarding the length of border closures and the recovery of travel demand.
The newly issued shares were partly acquired by the Fiji National Provident Fund and the Unit Trust of Fiji after existing shareholders, excluding the Fiji Government, opted not to participate. The annual report indicated that Fiji Airways encountered significant challenges as lenders expressed doubts about the airline’s survival during the pandemic.
To navigate this crisis, the airline collaborated with BNP Paribas, a French bank specializing in aviation financing advisory, to create a comprehensive financial model that projected monthly income statements, cash flows, and balance sheets for seven years. This model was pivotal in determining the airline’s ability to meet its debt obligations, identify necessary funding types, and recommend re-profiling for existing debts. It facilitated the development of over 30 different scenarios to present to financiers, demonstrating the airline’s capacity to repay debts based on varying border reopening timelines and operational recovery.
This strategic approach helped raise $561.4 million through a Sovereign Government Debt Guarantee to strengthen the airline’s cash reserves. To manage its financial stability, Fiji Airways implemented several key measures, including deferring aircraft lease rental payments and securing new loans exceeding $380 million from the Asian Development Bank, along with domestic loans featuring extended repayment periods and a four-year deferment on loan capital repayments.
In August 2021, shareholders at a special general meeting approved a plan to raise $F200 million by issuing up to 47,393,365 ordinary shares at the reduced price. In October 2021, the Fijian government invested $F101.9 million for 24,170,428 new shares. As existing shareholders largely declined to participate in the capital raise, the board decided to offer the remaining shares to the Fiji National Provident Fund and the Unit Trust of Fiji. By June 2022, the Fiji National Provident Fund acquired 22,061,790 ordinary shares, amounting to 30.02% of the total issued shares, for $F93.1 million, while the Unit Trust of Fiji obtained 1,161,147 shares for $4.9 million.