China Southern to raise $1.5b through new shares

China Southern Airlines hopes to raise over US$1.5 billion through the issue of new shares in Hong Kong and Shanghai, BusinessWeek reported. The company, scheduled to resume trading on Tuesday, will use the sale of shares to repay US$2 billion in bank loans due by the end of next year. The airline’s total debt stood at US$8.8 billion at the end of June 2009, more than seven times the company’s total equity. “The company is actively seeking ways to strengthen its capital base and lessen its debt burden,” China Southern said in a statement to the Hong Kong Stock Exchange. “Given the current financial condition of the group, the directors believe that taking up further borrowings or other bank financing would increase the group’s finance costs and in turn will further deteriorate the group’s financial position.” China Southern, the country’s largest carrier, posted its first loss in three years in 2008, but said in January that it hopes to post a profit for 2009 on the back of economic recovery in China.