New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Air New Zealand Capital Raise Deferred</h2>
Air New Zealand’s (AIR) capital raise will now be undertaken before 30 September 2021, as opposed to before 30 June 2021 as previously outlined. The delay will provide more accuracy around the size of the raise and will reduce the risk of under-funding, in our opinion. AIR’s immediate capital needs are more than accounted for in the revised terms of the government funding facility.
Revised terms of government funding facility
The extended timeframe for the capital raise has resulted in a renegotiation of the Government’s funding facility, on far more favourable terms to AIR. The facility size increases to a total of NZ$1.5bn (from NZ$900m) with pricing (above the bank bill benchmark rate; currently ~0.3%) of 3.5% for the first NZ$1bn, compared to an effective rate of 7%-8% that AIR is currently paying. AIR has drawn-down NZ$350m of the current facility having made no further facility drawdowns since 25 February 2021. The increase in the total facility size reflects the need to ensure AIR as a going concern at FY21 year end. &nbsp;
The Government remains committed to retaining a majority shareholding in AIR upon completion of the capital raise.
Improved cash burn
AIR’s cash burn guidance was removed earlier this week given the Trans-Tasman bubble announcement. Given the likely significant working capital movements with new forward bookings, AIR’s cash burn will, at least temporarily, improve substantially.
Our view
We remain NEUTRAL on AIR. The recent share price lift around the Trans-Tasman bubble announcement appears modestly over-done relative to the potential benefit to forward net asset value (NAV) estimates. &nbsp;
Andy Bowley&nbsp; Head of Research
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1696510696687908827&amp;th=178b377d79bbb7db&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-7fFBarQSnfVvLUPaWgEzAlLzmZwhof62PqY1JIvWSRtAphi1lRRNg5_Ngtrt1TTR_gi8l9C5JM-R4QxAp7VBoLg87E7le4M4FULtZReMeFPlUrijHuh_7G5I&amp;disp=emb" class="editor-image img-responsive"></figure>
 M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Air New Zealand Capital Raise Deferred
Air New Zealand’s (AIR) capital raise will now be undertaken before 30 September 2021, as opposed to before 30 June 2021 as previously outlined. The delay will provide more accuracy around the size of the raise and will reduce the risk of under-funding, in our opinion. AIR’s immediate capital needs are more than accounted for in the revised terms of the government funding facility.
Revised terms of government funding facility
The extended timeframe for the capital raise has resulted in a renegotiation of the Government’s funding facility, on far more favourable terms to AIR. The facility size increases to a total of NZ$1.5bn (from NZ$900m) with pricing (above the bank bill benchmark rate; currently ~0.3%) of 3.5% for the first NZ$1bn, compared to an effective rate of 7%-8% that AIR is currently paying. AIR has drawn-down NZ$350m of the current facility having made no further facility drawdowns since 25 February 2021. The increase in the total facility size reflects the need to ensure AIR as a going concern at FY21 year end. &nbsp;
The Government remains committed to retaining a majority shareholding in AIR upon completion of the capital raise.
Improved cash burn
AIR’s cash burn guidance was removed earlier this week given the Trans-Tasman bubble announcement. Given the likely significant working capital movements with new forward bookings, AIR’s cash burn will, at least temporarily, improve substantially.
Our view
We remain NEUTRAL on AIR. The recent share price lift around the Trans-Tasman bubble announcement appears modestly over-done relative to the potential benefit to forward net asset value (NAV) estimates. &nbsp;
Andy Bowley&nbsp; Head of Research

 M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Air New Zealand

Air New Zealand: Capital Raise Deferred