Alliance Aviation plans $85m equity raise to acquire aircraft
Australia’s Alliance Aviation is looking to raise around A$122 million ($85 million) in equity capital, for acquiring aircraft to take advantage of growth opportunities.
This comprises $A91.9 million via a fully underwritten institutional share placement and a A$30 million target from a non-underwritten share purchase plan extended to existing shareholders.
The grounding of airline fleets globally “presents significant opportunities for Alliance to expand its fleet”, the company said today in a disclosure to the Australian Securities Exchange (ASX).
“Alliance has continued to operate profitably due to its focus on contract flying, a diverse business model and its ability to react quickly to the changing aviation environment. Alliance believes it is now in an enviable position and is looking to invest for future growth.”
Cirium fleets data show that Alliance Airlines operates an all-Fokker fleet, comprising 30 F100s, 16 F70s, and five F50s, between 24 and 31 years old.
“The capacity, range, aerodrome accessibility and other features of Alliance’s aircraft continue to be of importance to Alliance’s existing customers, as they provide an optimum combination of features for regional services,” it says.
“Alliance also considers that these features are likely to be valuable to prospective customers, particularly because 100- and 80-seat jet aircraft are the ideal aircraft size for prospective customers wishing to launch new regional services.”
The company is offering 31.1 million shares to eligible institutional investors at A$2.95 each, fully underwritten by Ord Minnett as lead manager. The placement price represents a 5% discount to the previous close of A$3.10 on 10 June, prior to a trading halt today ahead of the announcement.
The 31.1 million new shares represent approximately 24.4% of the company’s existing issued share capital, which means it does not have to seek shareholder approval under the ASX’s class waiver decision on temporary extra placement capacity, dated 23 April.
On 31 March, ASX announced temporary capital raising relief to accommodate the need for listed entities to raise capital due to the effects of the Covid-19 outbreak, and adjusted the limits on relevant capital raising announced on or after 23 April from 15% to 25%.
Alliance proposes to issue the placement shares on 18 June.
Under the share purchase plan, the company is offering more than 10 million new shares to existing eligible shareholders. Each shareholder can subscribe to new shares worth A$1,000-30,000 collectively on a gross basis.
The offer opens on 19 June and is expected to close on 9 July, 17:00 Brisbane time. The issue price will be the lower of A$2.95, equivalent to that of the share placement, and a 2% discount on the five-day volume-weighted average price of the company’s shares, up to and including 9 July.
The issue date for new shares under the purchase plan is 20 July. As the share purchase plan is not underwritten, the company may choose to scale back the applications or accept these in part or in whole.
The company also states it has extended the term of its debt facilities with existing lenders, the Australia and New Zealand Banking Group and the Commonwealth Bank of Australia, on 28 May. Revolving term loan facilities of A$70.2 million and a A$5 million working capital facility, of which A$4.5 million is undrawn, were both extended until January 2022.
“We intend to undertake a formal refinancing process in 2021,” managing director Scott McMillan said.
Referring to a trading update on 20 May, in which it states its expectations for charter demand in the domestic Australian market to rise, Alliance says that the Covid-19 pandemic has “presented the company with a number of prospective expansion opportunities”.
These include the potential to service changing air travel requirements of existing customers and providing continued service to customers that were previously not its long-term customers.
“The Australia domestic aviation sector is currently undergoing significant change, and Alliance believes this will require existing operators and any potential new sector participants to adapt to a new operating and competitive environment,” it says.
It adds: “While it is not possible to determine how long these changes will last, Alliance believes they will be prolonged as Australia continues to navigate the pandemic and critical industries reassess their risk profiles.”