Air New Zealand has launched a $2.2 billion equity and debt package to repay its current Crown loan, strengthen its balance sheet, improve liquidity and help position the airline for recovery.

Existing shareholders will be able to buy two shares each for 53c – a massive 61% discount to the current share price, which airline chairman Dame Therese Walsh said was secured after comparison with other discount rates on the market.

When trading was halted this afternoon, shares of Air New Zealand were trading at $1.375.

By taking over their rights in full, eligible shareholders will retain their same level of shareholding, specifies the airline.

If an eligible shareholder decides not to exercise his rights in full, his original holding will be diluted. However, eligible shareholders will have the opportunity to sell their rights to the NZX during a rights trading period.

The recapitalization program would allow the airline to repay $850 million of its government loan and provide $950 million in cash to help the airline through its “survive, recover and thrive” phases.

There will be strong interest in the airline’s performance on the NZX and it said its share price is expected to “reset” in response to the company’s rights offering.

The pack consists of three parts:

• A $1.2 billion pro rata renewable rights offering, allowing eligible shareholders to purchase additional Air New Zealand shares at a price below the prevailing share price. The Crown has agreed to support the offer and will participate in the rights offering to retain a 51% stake in the airline.

&bull: $600 million in shares redeemable at the Crown, including approximately $400 million which the airline intends to refinance through approximately $600 million in debt markets issues which will be businesses by June 30 of this year.

• There will also be a new $400 million Crown loan to replace the existing Crown loan facility, which is available to the airline until January 2026, and will give the airline additional flexibility if needed, Walsh said.

The airline does not expect to pay a dividend until 2026.

“While there are still bumpy skies ahead over the next few years, now is the time for Air New Zealand to raise equity, recapitalize its balance sheet and repay the loan it has received from the Crown. during the Covid crisis. This is an important step in refueling for our recovery,” Walsh said.

The airline’s chief executive, Greg Foran, said the airline is now focused on growing its domestic network, optimizing its international routes and streamlining its fleet towards more efficient and sustainable aircraft. Its Airpoints program was being overhauled and would be part of the airline’s turnaround.

“The past two years have not been easy for our shareholders with the suspension of our dividend payments since 2020 and dwindling capital reserves,” Foran said.

“Our shareholders have been at the forefront as we have taken steps to help mitigate the impact of the pandemic while positioning the airline to survive, then recover and finally thrive in the years to come.”

Today it has resumed flights between Auckland and Singapore and operates around 40% of its international network. As border rules are relaxed, it also faces growing competition from other airlines announcing restart dates.

The airline said today it is targeting a pre-tax loss of less than $800 million for the full year, a brighter prospect than the $800 million surplus it forecast on last month.