Liaoning Fangda Group Industrial, controlling owner of Hainan Airlines Holding, has outlined plans to inject more cash into the loss-making carrier in a private placement to be issued to wholly-owned Fangda subsidiary Hainan Hanwei Investment, according to a series of Shanghai Stock Exchange filings.
Hanwei will buy up to CNY10,870,393,700 yuan (USD1.6 billion) worth of shares (9,972,838,277 of them) in the Hainan Airlines (HU, Haikou) parent, the proceeds to be deployed “to supplement working capital”, the filings published late on August 11 said.
Trading in Hainan Airlines Holding, which Fangda bought from failed conglomerate HNA Group last year, is limited due to risk of delisting, but the stock price rose on the news of the cash injection. The carrier, whose majority-owned subsidiaries include Shaanxi Changan Airlines Travel Co., Ltd., China Xinhua Airlines, Fuzhou Airlines, GX Airlines, Lucky Air (China), Shanxi Airlines, and Urumqi Air, said in January that it would ask the stock exchange to cancel the risk warning, a development it had disclosed in April 2021. But most of the carriers under the holding company have struggled this year to recover from the Covid-19 pandemic.
Meetings of Hainan Airlines Holding’s board of directors and board of supervisors approved the cash booster on August 11, but it still needs to be reviewed and approved by the company’s general meeting of shareholders. The price per share for the issue is CNY1.09 (USD0.16), representing a discount of about 24% compared with the closing price the previous day.
“After the completion of this non-public offering, the controlling shareholder of the company will be changed to Hainan Hanwei Investment Co Ltd, but the actual controller is still [Fangda owner] Mr Fang Wei, which will not cause the company’s equity distribution to be unqualified for listing,” one of the filings clarified.
Demand for aviation has been greatly impacted by the pandemic, the disclosure said, but the participation of Hanwei Investment in the issue “provides a strong financial guarantee for the development of the company’s main business and fully demonstrates the controlling shareholder’s support for the company’s development and confidence in its future prospects.”
This is the first financing for Hainan Airlines Holding after its bankruptcy and restructuring, according to financial news site Yicai Global. Its last (fourth) private placement since it went public in 1999 was in 2016. After the new injection, Fangda will hold a 42.5% stake in the company, up from 25.3%.
Hainan Hanwei Investment entered the share capital of Hainan Airlines Holding for the first time on July 29, another stock exchange filing shows, when existing shareholder Grand China Air sold it a 1.73% stake at CNY1.32 (0.19) per share. Grand China’s stake now stands at 9.94%.
Also on August 11, Hainan Airlines confirmed that the China Securities Regulatory Commission had fined it CNY3 million (USD442,000) due to violations of information disclosure rules. Eleven of its executives will be punished separately for failing to disclose related-party transactions and guarantees. Four senior executives including a vice president announced their resignations the previous day.
In further related news, Juneyao Air (HO, Shanghai Hongqiao) revealed on August 16 that Fangda's Fang Wei had personally bought a 1.49% stake in Juneyao on the secondary market. He was not among the top 10 shareholders when the airline released its first-quarter earnings report in April but appeared as sixth-biggest in the new disclosure with 32,941,197 shares.
