The Qantas Airways Limited (ASX: QAN) share price is soaring higher today after the airliner released a market update regarding an additional $1 billion of funding that it has secured for its business.
After rocketing as much as 31.27% in early trade this morning, Qantas shares are now trading 20.85% higher for the day at $3.13.
Significant additional liquidity raised
Qantas has announced today that it successfully secured a total of $1.05 billion of additional liquidity in its latest round of debt funding. These additional funds will help secure the long-term viability of the airline and strengthen its position to navigate the fallout from the coronavirus crisis, as the majority of its revenue stream dries up over the short term.
On March 17, Qantas cut its international flight capacity by 90% and its domestic capacity by 60%. Following this on March 19, Qantas announced 150 aircraft were to be temporarily grounded.
Since these cuts have come into place, the Australian government has put in place even stricter travel guidelines for Australians. As of March 20, only Australian citizens, residents and immediate family members can travel to Australia, and all travellers to Australia are required to self-isolate for 14 days. Australians are being strongly recommended not to travel overseas for any reason. Additionally, a number of states have closed their borders including Western Australia, Tasmania, Northern Territory and South Australia and all non-essential domestic travel has been requested to cease.
Qantas’ additional $1.05 billion debt has been secured against 7 of the group’s 11 wholly-owned Boeing 787-9 aircraft, which were purchased with cash in recent years. The new loan has a tenure period of 10 years, with an annual interest rate of 2.75%.
Qantas noted that it has a further $3.5 billion of unencumbered assets available, which it believes further justifies taking this step.
Total cash balance raised to $2.95 billion
With this additional funding now in place, Qantas’ available cash balance has increased to a total of $2.95 billion. In addition, the company has available to it an additional $1 billion undrawn debt facility.
On another positive note, Qantas noted that its overall net debt position still remains at the lower end of its target range at $5.1 billion. It also has no major debt maturities to pay until June 2021.
Qantas Group CEO Alan Joyce said: “Over the past few years we’ve significantly strengthened our balance sheet and we’re now able to draw on that strength under what are exceptional circumstances. Everything we’re doing at the moment is focused on guaranteeing the long term future of the national carrier, including making sure our people have jobs to return to when we have work for them again.”
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Phil Harpur owns shares of Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Here are 2 quality ASX healthcare shares to buy in July – July 2, 2020 8:30am
- These are 2 quality ASX shares to buy with $2,000 – July 1, 2020 12:43pm
- These 2 ASX tech shares show stellar growth prospects – July 1, 2020 12:12pm