CICC Assists China Southern Airlines Convertible Bonds Issuance
In November, 2020, China Southern Airlines Company Limited (600029.SH / 1055.HK, “China Southern Airlines”, the “Issuer” or the “Company”) has completed RMB16.00bn A-share convertible corporate bonds issuance (the “Issuance”, the “Project”). CICC acted as Sole Sponsor and Lead Left Underwriter in the transaction.
This is the largest ever convertible bonds issuance project in A-share air transport sector.
About China Southern Airlines
China Southern Airlines, incorporated in March 1995, is a main air transportation company under China Southern Air Holding Limited Company (“China Southern Air Holding”). It is principally engaged in domestic, regional and international air transportation of passenger, cargo, mail and baggage. China Southern Airlines is an airline with the largest number of transport aircraft, the most developed route network and the largest annual passenger turnover in China. In 2019, the Company served nearly 152 million passengers, ranking first among Chinese airlines for 41 consecutive years. It ranked first in Asia and third in the world both in terms of fleet size and passenger turnover.
As of the end of September 2020, China Southern Airlines recorded total assets of RMB315.491bn and net assets attributable to shareholders of the Company of RMB72.091bn. In 2019, China Southern Airlines achieved operating revenue of RMB154.322bn and net profit attributable to shareholders of the Company of RMB2.651bn.
CICC elaborately designed the two-step plan to facilitate the Company to see “large-scale capital injection in a short period of time”. As A-share Sole Sponsor, A-share Lead Left Underwriter and H-share Sole Financial Advisor in the transactions, CICC used extensive project experience to comprehensively coordinate and push forward various work, helping the Company to get financed with approx. RMB32.0bn in less than one year. The financing size of the A share non-public issuance and H share non-public issuance in the first stage is RMB12.782bn and HKD3.5bn, and the scale of the A-share convertible corporate bonds issuance is RMB16.00bn, which is the largest A+H share non-public follow-on offering and A share convertible bonds issuance in terms of the proceeds in the air transport sector.
In the meantime, the deal was an important part of consolidating achievements in CSAH’s ownership diversification reform and also a paradigm for ownership diversification reform of central state-owned enterprises. In June 2019, CSAH entered into the Capital Increase Agreement with People's government of Guangdong Province, Guangzhou and Shenzhen to obtain a total capital contribution in cash of RMB30bn and achieve ownership diversification. Through the two-step of “non-public issuance” followed by “convertible bonds issuance”, equity diversification funds from China Southern Air Holding are successfully injected into the listed company in a short interval, helping the Company to increase fleet size and transport capacity, alleviate the impact of COVID-19 on operating pressure, better serve the implementation of national strategies including Guangdong-Hong Kong-Macau Greater Bay Area and “the Belt and Road Initiative” and accelerate the realization of the overall strategic goal of building an international airlines with extensive network.
Moreover, during the project of A-share convertible corporate bonds issuance, CICC fully mobilized various resources, closely followed the market and successfully assisted the Issuer to accurately seize the favorable issuance timing. The convertible bonds were only issued online, with an online investors purchase size of 8.45 trillion and a success rate of 0.0442%.
CICC with rich experience in capital markets, high quality service and execution efficiency, won the Company’s recognition by leveraging our extensive experience in air transport industry and deep understanding of the reform of state-owned enterprises. This deal, comprised of the A+H share non-public issuance in the first stage and the A-share convertible corporate bonds issuance in the second stage, further strengthens the leading stage of CICC in investment banking in the air transport sector and serves as paradigm for CICC’s serving SOEs with professional competence.
As a leading investment bank with “China Roots, International Reach”, CICC will continue to utilize its capital market expertise as well as its seamless cooperation of onshore and offshore businesses to provide continuous support to our customers in terms of introduction of global investors, reaching international capital market, and promoting global business development.