Flush with cash, Singapore Airlines to spend $2.7 billion redeeming convertible bond

(Reuters) - Singapore Airlines Ltd (SIA) said on Tuesday its strong cash position would allow it to spend S$3.86 billion ($2.71 billion) to redeem convertible bonds issued in 2020 that helped it weather the halt in travel during the pandemic.

The airline said in a statement that the bonds, which have a conversion price below the current share price, had become its most expensive form of financing even though interest rates were rising.

The bonds with a principal amount of S$3.5 billion were issued as part of a broader S$19 billion financial rescue package backed by the airline's majority shareholder, state fund Temasek Holdings.

By June 30 this year, as borders opened and travel demand rebounded, the airline had a cash balance of S$16.1 billion. It reported the second highest quarterly operating profit in its history in the June quarter.

The bond redemption, to occur in December at 110.4% of the principal amount, will be funded from existing cash reserves, SIA said.

The airline had raised an additional S$6.2 billion in liquidity through a separate issue of mandatory convertible bonds in 2021. It has not announced plans to redeem those at this stage.

($1 = 1.4246 Singapore dollars)

(Reporting by Jamie Freed in Sydney; Editing by Kirsten Donovan)