China Eastern Airlines, the country's third largest carrier by fleet size, said Wednesday it has won regulators' approval to raise about 7 billion yuan ($1.03 billion) through a private placement, in a bid to turn its net assets to the black before completing a proposed merger with Shanghai Airlines.
China Securities Regulatory Commission (CSRC) on Wednesday afternoon approved the air carrier's new issuance of 1.35 billion A shares and 490 million H shares with a combined worth of 7.02 billion yuan through a private placement, the company said.
The latest announcement means the carrier has completed all the required legal procedures for the new issuance to go ahead after the plan was approved by its shareholders in September.
China Eastern intends to sell the Shanghai-listed A shares to as many as ten selected investors, including its parent China Eastern Air Holding Co, the China Business News (CBN) reported today, citing Luo Zhuping, board secretary of the company.
China Eastern's asset structure will be better-off upon completion of the new issuance. Earlier, its chairman Liu Shaoyong had estimated that raising 7 billion yuan would help cut the company's debt-to-asset ratio significantly to about 94.7 percent.
China Eastern returned to net profit in the third quarter of 2009, thanks to rising demand for air travel and declining fuel prices. It made a net profit of 23.16 million yuan in the quarter. In the first nine months of this year, the company made a net profit of 1.2 billion yuan, compared with a net loss of 2.29 billion yuan in the same period of last year. But its net assets remain in the negative territory.
The CSRC will review the proposed merger between the two airlines, and Liu had said he expected the final approval by the end of this year.
Liu also said the company had begun working with Shanghai Airlines in preparation for their upcoming merger. The newly-released winder-spring flight schedule will help integrate their operations, he said. The two companies are also using Shanghai Hongqiao International Airport as a terminal for passengers transfer to each other's flights by one ticket.