After two long years of turbulence and with border restrictions now starting to ease, Air New Zealand is today launching a comprehensive recapitalisation package to repay its existing Crown loan, strengthen its balance sheet, improve liquidity and help position the airline for recovery.  

The $2.2 billion recapitalisation package is made up of three parts:

• - a $1.2 billion pro rata renounceable Rights Offer, allowing eligible shareholders an opportunity to buy additional shares in Air New Zealand at a discount to the prevailing share price.  The Crown has committed to supporting the Rights Offer and will participate in the Rights Offer to retain a 51% shareholding in Air New Zealand.  The Rights Offer is underwritten, other than in respect of the Crown participation; 
• - a $600 million issuance of redeemable shares to our majority shareholder, the Crown, of which approximately $400 million we intend to refinance through an approximately $600 million debt capital markets issuance that will be undertaken by 30 June this year, subject to market conditions; and

• - a new $400 million Crown loan to replace the existing Crown loan facility, which is available to the airline through to January 2026.

Air New Zealand Chair Dame Therese Walsh says, “While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity, recapitalise its balance sheet and repay the loan it received from the Crown during the Covid crisis.  This is an important step in refuelling for our recovery.

“When Covid struck in early 2020 we took decisive action. Routes were closed, planes parked, and the number of Air New Zealand employees was reduced by almost a third. Almost overnight, passenger numbers halved, and flight demand dropped 95 per cent.  

“With New Zealand's support, and Crown loan funding, we were able to keep the country connected. While many airlines were grounded, we've flown every day, bringing in vital supplies, flying Kiwis home and keeping New Zealand exports moving around the world.” 

“Covid isn’t behind us yet. There will still be significant challenges and uncertainties to face, and it will take time to recover, but Air New Zealand is committed to rebuilding a stronger, more nimble airline that delivers for all New Zealanders”, said Dame Therese. 

Commenting on the recapitalisation package Air New Zealand Chief Executive Officer Greg Foran said, “This is an important next step, as we are preparing to return to key international destinations, welcome international visitors back to New Zealand and launch a new service to New York.  

“The last two years haven’t been easy for our shareholders with the suspension of our dividend payments since 2020 and the decrease in equity reserves. Our shareholders have been top of mind as we took action to help mitigate the impact of the pandemic while positioning the airline to survive, then revive and finally thrive in the years to come.

“We’re now focused on growing our domestic network, optimising our international routes and streamlining our fleet to more efficient and sustainable aircraft.  And we’re developing more benefits and value for our millions of Airpoints members. 

“Our Kia Mau strategy sets a clear flight path for the coming years and while there will always be significant risks for the airline, importantly, our recapitalisation plan will help position us to thrive again”, said Mr Foran.  

The Rights Offer

As part of the recapitalisation, Air New Zealand is raising $1.2 billion through a pro rata renounceable Rights Offer. This will enable eligible shareholders to purchase up to 2 new shares for every 1 share they own in Air New Zealand at an offer price of NZ$0.53 per share. Those shareholders who take up their full entitlement will also be able to apply for additional shares in the shortfall bookbuild process.  Shareholders who choose not to participate have the option of selling some or all of their rights on the NZX or, if they do nothing, they may receive some value through the shortfall bookbuild process, if the price determined in the shortfall bookbuild process exceeds the offer price.

The Rights Offer will open from Wednesday, 6 April 2022 and close on Monday, 2 May 2022, and is open to eligible Air New Zealand shareholders on the airline’s share register as at 7:00pm NZT on the Record Date of Tuesday, 5 April 2022 who are located in New Zealand and Australia and a limited number of other jurisdictions.   

More information about the Rights Offer, including on the eligibility criteria and how to participate, is set out in the Air New Zealand Offer Document, which should be read together with the Investor Presentation, available at: https://airnz.rightsoffer.co.nz.  These documents contain important information about Air New Zealand and risks associated with an investment in Air New Zealand.  Shareholders should ensure their contact information is up to date, and importantly, seek independent financial advice where required.

Important information

This communication is not for distribution or release in the United States.  This communication does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States.  The securities referred to in this communication have not been, and will not be, registered under the US Securities Act of 1933 (US Securities Act), or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold, directly or indirectly, in the United States or to any person acting for the account or benefit of any person in the United States, except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable securities laws of any state or other jurisdiction of the United States. 

Explainer 1: participating in the Air New Zealand Rights Offer   

Air New Zealand is offering eligible shareholders in certain jurisdictions the opportunity to buy additional shares in Air New Zealand at a discount to the prevailing share price.  This Offer is open to all eligible Air New Zealand shareholders at the same time. By taking up their rights in full, eligible shareholders will maintain their same level of shareholding. 

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

Shareholders who do not take up or trade their rights may have the opportunity to receive some value depending on the outcome of a sale of the shares attributable to their rights at the end of the Rights Offer.  Shareholders who take up their rights in full can also apply for additional shares.

Those who do not currently hold shares in Air New Zealand and meet certain eligibility criteria may be eligible to buy renounced rights and should speak to an NZX market participant.  Rights purchased on the NZX may only be exercised by purchasers that meet eligibility requirements, which will be set out in the Offer Document. In particular, rights may not be exercised by purchasers that are in the United States. 

Eligible Air New Zealand shareholders are encouraged to visit the Air New Zealand Rights Offer website to learn more about the Rights Offer, including how to participate: https://airnz.rightsoffer.co.nz. These documents contain important information about Air New Zealand and risks associated with an investment in Air New Zealand. 

Explainer note 2: Rights Offer likely to trigger an AIR share price reset event  

Air New Zealand’s share price is expected to reset in response to the company’s Rights Offer.  While the Air New Zealand Board and management do not provide commentary on the AIR share price, they do wish to note the following contributing factors in relation to its Rights Offer.   

• -Under the Rights Offer up to approximately 2,245,620,088 fully paid ordinary new shares will be issued at a ratio of 2 for 1, representing approximately 200% of existing Air New Zealand shares on issue and which will have a material dilutionary effect on shareholders’ future potential earnings per share.  
• - The fully paid ordinary shares are being offered at $0.53 per share, representing:  
• a 61.5% discount to the last traded price on NZX of $1.375 on Wednesday, 30 March 2022; and 
• a 34.7% discount to the Theoretical Ex-Rights Price (TERP) of $0.81.  TERP is the theoretical price at which an Air New Zealand share will trade immediately after the ex-date for the Rights Offer.  It is a theoretical calculation only and the price at which Air New Zealand shares will trade will depend on many factors and may differ from TERP. 
• - On 24 February 2022, together with the company’s Interim results for the six-month period ended 31 December 2021, Air New Zealand provided guidance for the full financial year ending 30 June 2022 of an expected loss in excess of $800 million before taxation and other significant items.  Air New Zealand now expects its FY22 full year result to be a loss before other significant items and taxation of less than $800 million.
• - Lastly, while capital markets have held up reasonably well in response to ongoing macro-economic and geopolitical events, market volatility remains high, and uncertainty remains a prevailing theme for many investors in the current climate.

Issued by Air New Zealand Communications.