Air New Zealand (ASX:AIZ) share price plummets on confirmation of NZ$2.2b ‘recovery’ cap raise

A guidance upgrade hasn’t been enough to offset news of a major capital raising.

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Key points

  • The Air New Zealand share price exited a trading halt on Thursday, plunging as much as 15.6% in early morning trade
  • The freeze was broken with news of a NZ$2.2 billion COVID-19 recovery package, including a NZ$1.2 billion rights offer
  • Under the capital raise, new shares will be issued at 49 Australian cents apiece, representing a 62% discount on the previous closing price

The Air New Zealand Limited (ASX: AIZ) share price is nosediving on Thursday after the company announced a NZ$1.2 billion (A$1.1 billion) rights offer.

The offer is part of a NZ$2.2 billion ($A2.04 billion) ‘recapitalisation package’ announced to the market after yesterday’s close.

The Air New Zealand share price was put on ice yesterday as whispers of the raise spread through the market.

The airline’s stock was defrosted this morning. At the time of writing, it’s trading for $1.18, having plunged 7.42%.

However, that’s an improvement on the stock’s early morning performance. The Air New Zealand share price plunged to a 52-week low of $1.09 just after the ASX opened, representing a 15.6% fall.

Let’s take a closer look at the news weighing on the Kiwi airline’s stock today.

Why is the Air New Zealand share price tumbling?

The Air New Zealand share price is plummeting on news of a major capital raise. The raise will see new shares offered for 49 Australian cents apiece – a discount of approximately 62% on the company’s previous close as part of a rights offer.

Approximately 2.2 billion new shares will be issued under the offer, representing around 200% of the company’s outstanding shares.

Eligible shareholders will have the opportunity to purchase two new shares in the airline for every share they already own.

Additionally, around NZ$600 million (A$557.4 million) worth of new shares will be issued to the Crown to maintain its 51% stake in the company.

That’s on top of a NZ$400 million (A$371.6 million) four-year Crown loan secured by the company. Though, it’s not intending to draw on that debt facility.

NZ$850 million (A$789.64 million) of the cash raised will be used to repay an existing Crown loan.

Another NZ$950 million (A$882.54 million), minus transaction costs, will boost the airline’s balance sheet, improve its liquidity, and position it for recovery.

Air New Zealand chair Dame Therese Walsh said:

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.

Financial year 2022 guidance upgrade

The airline has also released news that might be helping the Air New Zealand share price today.

It has upgraded its financial year 2022 guidance.

Previously, Air New Zealand told ASX investors that it was expecting to report a loss before tax and significant items of more than NZ$800 million (A$743.19 million) in FY22.

Now, after the New Zealand Government announced its plan to open the nation’s borders, the airline expects a pre-tax loss of less than NZ$800 million.

However, it predicts losses will continue beyond this financial year.

Air New Zealand share price snapshot

The Air New Zealand share price has had a rough trot in 2022 so far.

As of its previous close, it had tumbled nearly 10% year to date. Today’s drop included, it’s fallen 17% this year.

It’s also nearly 25% lower than it was at this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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