Air NZ secures $900m loan facility from Govt

20th March 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

The Government has provided a $900m loan facility to Air New Zealand to help the airline cope with the impacts of the Covid-19 outbreak.

It will be used to support the airline’s business operations as it managed the implications of international border restrictions and a substantial reduction in travel demand.

The standby loan facility would provide Air NZ with the ability to draw down funds should its cash reserves drop below a minimum threshold.

It would be provided in two tranches: a tranche of $600m with an effective interest rate initially expected to be between 7% and 8% per annum; and a second tranche of $300m with an effective interest rate initially expected to be in the order of 9% per annum.

The facility would be available for a period of 24 months.

The airline cancelled its 2020 interim dividend of 11 cents per share in order to access the facility. The dividend, which totalled $123m, was to be paid to shareholders on 25 March.

Under the agreement, the Government has the ability to seek repayment through a capital raise by the airline after six months, or converting the loan to equity.

Due to the decline in Air NZ’s market capitalisation, the airline would not have to obtain shareholder approval for the facility, following a waiver from the NZX.

“Air NZ is greatly appreciative of the Government’s support of a loan facility as the airline navigates its way through the unprecedented challenges created by Covid-19,” said Air NZ chairwoman Dame Therese Walsh.

“The Government and Treasury moved swiftly to ensure that Air NZ had financial certainty as demand for flights domestically and internationally has rapidly fallen due to travel restrictions implemented by countries around the world.

“The loan facility ensures that Air NZ can continue to play a vital role in connecting New Zealanders and our businesses with each other here at home and around the world.”

In a statement, both Air NZ and the Government acknowledged that the terms of the facility would not alter the fundamental principles of their relationship, with the airline’s board of directors, chief executive Greg Foran and the executive team, maintaining responsibility for all commercial and operational decisions of the airline.

The Government was also working with the airline to ensure other key services could be provided, including repatriation flights, maintaining critical cargo transport lines and having Air NZ staff assist the health response.