China Southern trading suspended after cash injection
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China Southern Airlines was suspended from trading yesterday, pending a decision on allocation of a 1.5 billion yuan (US$220 million) injection from its parent to reduce its debt ratio.
China Southern Air Holding Co, parent of the country's largest carrier, was granted 1.5 billion yuan by the Ministry of Finance, which will be injected into the carrier to support business development, it said in a statement to the Shanghai Stock Exchange.
Guangzhou-based China Southern and its parent are discussing arrangements to use the fund to reduce the debt ratio, which will be subject to further policy consultation with and proposal review by the relevant government authorities, the statement said.
"The debt ratio will be reduced to 84.11 percent from 85.73 percent after China Southern gained the 1.5 billion yuan injection based on its earnings report in the third quarter of last year," China Jianyin Investment Securities analyst Xie Hong said.
"China Southern need issue 162 million yuan-denominated shares and 162 million Hong Kong-listed shares to raise the fund based on the closing price of 6.62 yuan on Monday, which will increase its total share capital by 4.06 percent to 8.33 billion shares," Xie said.
The carrier made 322 million yuan in profit in the first nine months of last year, up 134 percent from a year earlier. It was expected to return to profit in 2009 after a 483 million yuan loss in 2008.
The government has injected a combined 15 billion yuan to the country's three largest carriers since 2008 - 9 billion yuan to China Eastern Airlines, 4.5 billion yuan to China Southern and 1.5 billion yuan to Air China - to help them fight the recession.
The country's aviation industry flew into the black with a net profit of 12.2 billion yuan last year, compared with a record 28 billion yuan loss in the previous year.
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