Southern Exposure

24 March 2020 By Ed Cropley Follow @edwardcropley

The national carrier has received a $514 mln state lifeline that ensures its survival. A high interest rate should ensure any loan is repaid quickly, while shareholders share the pain through suspended dividends. It’s a model for other countries considering bailouts to follow.

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New Zealand’s government on March 20 offered Air New Zealand an emergency lending facility of up to NZ$900 million ($514 million) to get it through the coronavirus crisis.

As part of the arrangement, the national carrier said it had cancelled its interim 2020 dividend. The government has the ability to force Air New Zealand to repay any loans within six months via a capital raise, or to convert outstanding debt into equity.

The loan facility is being offered in two tranches, one of NZ$600 million with a 7%-8% interest rate, and one of NZ$300 million with a 9% interest rate.

The British government is drawing up plans to buy equity stakes in airlines and other companies hit by the coronavirus crisis, the Financial Times reported on March 21.

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