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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Air New Zealand<br>Capital Raise has Landed</h2>
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<p><strong>RESTRICTED</strong></p>
<p>Air New Zealand (AIR) has launched its much anticipated capital raise with an underwritten 2-for-1&nbsp;renounceable&nbsp;rights issue of NZ$1.2bn. The government will also provide further funding headroom in the form of its existing redeemable share package and a new loan facility. The rights issue price of NZ$0.53 reflects a -62% discount to the current share price and a -35% discount to the theoretical ex rights price (TERP) of NZ$0.81. The government has committed to participating and will hold a post-offer 51% stake (vs ~52% currently). The proceeds will allow AIR to repay the government's existing loan facility, and provide additional liquidity. Due to&nbsp;Forsyth&nbsp;Barr's role in the transaction our rating is now RESTRICTED.&nbsp;</p>
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<h3>Major balance sheet&nbsp;recapitalisation&nbsp;</h3>
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<p>AIR's&nbsp;NZ$2.2bn&nbsp;recapitalisation&nbsp;is headlined by an NZ$1.2bn rights issue.&nbsp;NZ$600m will be a redeemable share issue to the Crown (treated as debt) of which&nbsp;~NZ$400m is due to be&nbsp;repaid via a proposed&nbsp;bond issue (totalling ~NZ$600m by 30 June 2022). The remaining NZ$400m will be an&nbsp;undrawn, four year, Crown standby loan facility. The existing government loan (drawn down to ~NZ$850m) will be repaid in full.&nbsp;On a pro-forma basis, taking into consideration&nbsp;all of these transactions, liquidity will increase to ~NZ$1.8bn&nbsp;vs ~NZ$1.4bn currently (which is consistent with liquidity at 23 February 2022). The remaining NZ$200m redeemable shares not repaid are currently intended to remain on issue.&nbsp;</p>
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<h3>Revised FY22 earnings loss guidance&nbsp;</h3>
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<p>AIR has upgraded its FY22 NPAT loss guidance from greater than -NZ$800m&nbsp;to less than -NZ$800m. It&nbsp;says that beyond FY22 losses are expected to be incurred in the near term subject to the level and pace of the demand recovery. AIR expects to have positive&nbsp;cashflows&nbsp;from operating activities from approximately 1Q23.&nbsp;</p>
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<h3>New medium term targets</h3>
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<p>AIR has published various operational and financial objectives for FY25: (1) to return to ~90% of FY19 ASK capacity, (2) approximate&nbsp;FY19 EBITDA (NZ$1.2bn)&nbsp;and NPAT (NZ$276m), (3)&nbsp;exceed 10% ROIC (FY19: 10.6%),&nbsp; and (4) gearing within its target range of 45%–55% in 2H25. AIR&nbsp;will seek to maintain an investment grade credit rating, and subject to performance, dividends are expected to be considered from FY26. Updated&nbsp;capex&nbsp;guidance suggests&nbsp;average committed aircraft&nbsp;capex&nbsp;of ~NZ$446m through FY23–FY28, plus NZ$400m–NZ$450m of interior retrofit costs for 14 existing B787s to commence no earlier than mid-FY24, anticipated NZ$150m–NZ$200m pa on digitisation and infrastructure, and ~NZ$150m pa on&nbsp;engine maintenance.&nbsp;</p>
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Air New Zealand Capital Raise has Landed

RESTRICTED
Air New Zealand (AIR) has launched its much anticipated capital raise with an underwritten 2-for-1&nbsp;renounceable&nbsp;rights issue of NZ$1.2bn. The government will also provide further funding headroom in the form of its existing redeemable share package and a new loan facility. The rights issue price of NZ$0.53 reflects a -62% discount to the current share price and a -35% discount to the theoretical ex rights price (TERP) of NZ$0.81. The government has committed to participating and will hold a post-offer 51% stake (vs ~52% currently). The proceeds will allow AIR to repay the government's existing loan facility, and provide additional liquidity. Due to&nbsp;Forsyth&nbsp;Barr's role in the transaction our rating is now RESTRICTED.&nbsp;


Major balance sheet&nbsp;recapitalisation&nbsp;


AIR's&nbsp;NZ$2.2bn&nbsp;recapitalisation&nbsp;is headlined by an NZ$1.2bn rights issue.&nbsp;NZ$600m will be a redeemable share issue to the Crown (treated as debt) of which&nbsp;~NZ$400m is due to be&nbsp;repaid via a proposed&nbsp;bond issue (totalling ~NZ$600m by 30 June 2022). The remaining NZ$400m will be an&nbsp;undrawn, four year, Crown standby loan facility. The existing government loan (drawn down to ~NZ$850m) will be repaid in full.&nbsp;On a pro-forma basis, taking into consideration&nbsp;all of these transactions, liquidity will increase to ~NZ$1.8bn&nbsp;vs ~NZ$1.4bn currently (which is consistent with liquidity at 23 February 2022). The remaining NZ$200m redeemable shares not repaid are currently intended to remain on issue.&nbsp;


Revised FY22 earnings loss guidance&nbsp;


AIR has upgraded its FY22 NPAT loss guidance from greater than -NZ$800m&nbsp;to less than -NZ$800m. It&nbsp;says that beyond FY22 losses are expected to be incurred in the near term subject to the level and pace of the demand recovery. AIR expects to have positive&nbsp;cashflows&nbsp;from operating activities from approximately 1Q23.&nbsp;


New medium term targets


AIR has published various operational and financial objectives for FY25: (1) to return to ~90% of FY19 ASK capacity, (2) approximate&nbsp;FY19 EBITDA (NZ$1.2bn)&nbsp;and NPAT (NZ$276m), (3)&nbsp;exceed 10% ROIC (FY19: 10.6%),&nbsp; and (4) gearing within its target range of 45%–55% in 2H25. AIR&nbsp;will seek to maintain an investment grade credit rating, and subject to performance, dividends are expected to be considered from FY26. Updated&nbsp;capex&nbsp;guidance suggests&nbsp;average committed aircraft&nbsp;capex&nbsp;of ~NZ$446m through FY23–FY28, plus NZ$400m–NZ$450m of interior retrofit costs for 14 existing B787s to commence no earlier than mid-FY24, anticipated NZ$150m–NZ$200m pa on digitisation and infrastructure, and ~NZ$150m pa on&nbsp;engine maintenance.&nbsp;


Air New Zealand: Capital Raise Has Landed