Singapore Airlines

[LionFlyer]

I was expecting closer to 1 billion losses from the fuel hedges.

[Mushy]

Regarding payment for the rights shares/MCB, SIA listed 2 methods for payment; ATM or Paynow.
What if a shareholder has the money in a local bank account but does not have ATM card or paynow?
I have been stressed today cos I am trying to solve this problem for a senior family member.
I explored the option of paying on behalf of family member but the banks I use (OCBC and citi) seem to have a limit for paynow of 1k.
I cannot use my ATM card to pay right, as the rights can only be seen using the rights registered owner's ATM account?

Also for curiosity, DBS paynow has a limit of 200k. I am sure there are shareholders (other than temasek) who are subscribing to more than 200k worth. How they pay man?

[ACTIVIST SPEAKS]

Watching the cna coverage on the SIA share price today is probably the funniest thing I have seen today. 

For a good laugh, watch the following:
Volatile day for shares of Singapore Airlines

And for those interested, here is the profile of the interviewee - Shukor Yusof.

Which part of the CNA interview did you find funny and laughed at?

12 May 2020 Soc Gen explained its action taken to suspend and eventually cease trading of SQ DLC.  

(click for details)

Relative to other incidents, the wiping up of SQ DLC (5x short) was relatively mute.
Of course, BT carried an super lengthy article by MLee might be the trigger point for Soc Gen to offer a goodwill gesture.
Key things to note (other than 30cents refund), will be after XR, SQ stocks behave extraordinary aka take off by more than 20%.

For those who like to gamble, wait for the 30cents and get ready to roll again?

Stay home and stay safe, everyone.

This is the first day trading of SIA Rights and MCB rights. But the buy-in market today wants to buy in the above two rights.
Does anybody know why? Are rights also subject to T+2?

Because someone shorted SIA CR and held it overnight to XR. The shortist managed to borrow SIA share but unable to borrow SIA R and MCB R. Thus, buy in was executed for shortist to cover delivery of SIA R and MCB R.

 
Thank you for the explanation. But isn't share lending suspended when a company undertakes corporate action?

There was a delivery failure resulting from the sale of SIA cum rights on 6 May (last day of cum-rights trading).  SGX instituted the buying in of the SIA shares on 8 May (ex-rights) and can only institute buying in of the rights when it started trading on 13th May.  Judging by the number of SIA rights buying in by SGX on 13th May, you should find a corresponding buying in of 9,700 SIA shares (ex-rights) on 8 May.  This is something that is unique to Singapore due to our settlement system and central depository system.

[ACTIVIST SPEAKS]

Regarding payment for the rights shares/MCB, SIA listed 2 methods for payment; ATM or Paynow.
What if a shareholder has the money in a local bank account but does not have ATM card or paynow?
I have been stressed today cos I am trying to solve this problem for a senior family member.
I explored the option of paying on behalf of family member but the banks I use (OCBC and citi) seem to have a limit for paynow of 1k.
I cannot use my ATM card to pay right, as the rights can only be seen using the rights registered owner's ATM account?

Also for curiosity, DBS paynow has a limit of 200k. I am sure there are shareholders (other than temasek) who are subscribing to more than 200k worth. How they pay man?

There is a third option...… Buying a Cashier Order and submitting it together with the ARE form (Application for Rights and Excess).  In your case, this appears to be the only option.

[ACTIVIST SPEAKS]

SQ is begging for money from shareholders.  Yet the MCB is designed to highly skewed in favour of the company.  If the conversion price is significantly higher than the eventual trading price, MCB holders will very likely get SQ shares.  Conversely, if the conversion price is significantly below the eventual trading price, they stand a chance their MCB may be redeemed (instead of enjoying the equity kicker).  One would thought SQ, in its present condition, would be kinder to loyal shareholders/investors.

SQ to its MCB holders is best described by Chinese :  共患难易 同福贵难

[wee]

SQ is begging for money from shareholders.  Yet the MCB is designed to highly skewed in favour of the company.  If the conversion price is significantly higher than the eventual trading price, MCB holders will very likely get SQ shares.  Conversely, if the conversion price is significantly below the eventual trading price, they stand a chance their MCB may be redeemed (instead of enjoying the equity kicker).  One would thought SQ, in its present condition, would be kinder to loyal shareholders/investors.

SQ to its MCB holders is best described by Chinese :  共患难易 同福贵难

 Not really begging since temasek is underwriting everything.

[karlmarx]

Prior to the rights issue, SIA had 1.2b shares. With the 3 for 2 rights, it now has 1.2b + 1.8b = 3b shares. The $3.5b of MCB converts -- if it does get converted -- to another 1.3b shares.

If the MCBs are converted, the converted shares will be 30% (1.3b/1.2b+1.8b+1.3b) of the enlarged number of shares. The potential dilution is not small, and so should at least be considered when evaluating the mother shares.

There is also another $6.2b of additional MCBs which may be sold, which translates to about 2.3b shares. In this case, if the MCBs are converted, the converted shares will be 45% (1.3b+2.3b/1.2b+1.8b+1.3b+2.3b) of the enlarged number of shares. It is not likely that this additional MCBs will be sold, unless the situation turns out to be much worse than expected.

The implication on the mother shares is that this 30% to 45% of potential dilution will be an overhang for a long time. The MCBs a financial obligation that in one of two ways will encumber the returns of the ordinary shareholder.

1) If SIA performs poorly and does not make enough money to even consider redeeming the MCBs, then shareholders be massively diluted when the MCBs are converted to shares. And since if SIA is not doing well, it is not likely there will be much/any dividends for shareholders. Massive dilution and no dividends = very bad for shareholders.

2) If SIA performs well enough, it will have the choice of either setting aside money to a) redeem the MCBs, or b) allowing the MCBs to convert to shares. Whether the MCBs are redeemed or converted will probably depend on whether Temasek thinks it is a good idea to take back the money to reinvest elsewhere (in which case they will redeem), or continue to ride with SIA (in which case they will convert).

b) If SIA does well and Temasek decides to convert, shareholders will be diluted. But since SIA wouldn't know whether Temasek will convert or redeem until they are close to the maturity date (10 years later), it is likely that they will be prudent with dividend payouts, if any. Low dividends and then dilution = bad for shareholders. But possibly a large dividend after conversion.

a) If SIA does well and Temasek decides to redeem, shareholders will not be diluted. But it also means the dividend payout ratio will not be high, so as to conserve cash for redemption. Lowest dividends but no dilution = not so bad for shareholders? And possibly higher dividends after redemption.

But until the recovery, which will probably take years, it is likely that shareholders will not be seeing much, if any, dividends. Since, in all three cases (1, 2a, or 2b), SIA's cashflows will be heavily encumbered by obligations to MCB holders. The company's cash will either be set aside for MCB's redemption, or if the MCBs are converted, the shareholder's share of the cash will be massively diluted.

In any case, it is likely that shareholders will not have to wait 10 years before they know if there will be a redemption/conversion, especially if the recovery is strong, say, in 5-6 years time. In which case a redemption may take place, if Temasek doesn't want to prolong the suffering of shareholders.

[specuvestor]

MCB is not for investors. It’s to signal to investors and business partners Temasek is backstopping

[Squirrel]

Prior to the rights issue, SIA had 1.2b shares. With the 3 for 2 rights, it now has 1.2b + 1.8b = 3b shares. The $3.5b of MCB converts -- if it does get converted -- to another 1.3b shares.

If the MCBs are converted, the converted shares will be 30% (1.3b/1.2b+1.8b+1.3b) of the enlarged number of shares. The potential dilution is not small, and so should at least be considered when evaluating the mother shares.

There is also another $6.2b of additional MCBs which may be sold, which translates to about 2.3b shares. In this case, if the MCBs are converted, the converted shares will be 45% (1.3b+2.3b/1.2b+1.8b+1.3b+2.3b) of the enlarged number of shares. It is not likely that this additional MCBs will be sold, unless the situation turns out to be much worse than expected.

The implication on the mother shares is that this 30% to 45% of potential dilution will be an overhang for a long time. The MCBs a financial obligation that in one of two ways will encumber the returns of the ordinary shareholder.

1) If SIA performs poorly and does not make enough money to even consider redeeming the MCBs, then shareholders be massively diluted when the MCBs are converted to shares. And since if SIA is not doing well, it is not likely there will be much/any dividends for shareholders. Massive dilution and no dividends = very bad for shareholders.

2) If SIA performs well enough, it will have the choice of either setting aside money to a) redeem the MCBs, or b) allowing the MCBs to convert to shares. Whether the MCBs are redeemed or converted will probably depend on whether Temasek thinks it is a good idea to take back the money to reinvest elsewhere (in which case they will redeem), or continue to ride with SIA (in which case they will convert).

b) If SIA does well and Temasek decides to convert, shareholders will be diluted. But since SIA wouldn't know whether Temasek will convert or redeem until they are close to the maturity date (10 years later), it is likely that they will be prudent with dividend payouts, if any. Low dividends and then dilution = bad for shareholders. But possibly a large dividend after conversion.

a) If SIA does well and Temasek decides to redeem, shareholders will not be diluted. But it also means the dividend payout ratio will not be high, so as to conserve cash for redemption. Lowest dividends but no dilution = not so bad for shareholders? And possibly higher dividends after redemption.

But until the recovery, which will probably take years, it is likely that shareholders will not be seeing much, if any, dividends. Since, in all three cases (1, 2a, or 2b), SIA's cashflows will be heavily encumbered by obligations to MCB holders. The company's cash will either be set aside for MCB's redemption, or if the MCBs are converted, the shareholder's share of the cash will be massively diluted.  

In any case, it is likely that shareholders will not have to wait 10 years before they know if there will be a redemption/conversion, especially if the recovery is strong, say, in 5-6 years time. In which case a redemption may take place, if Temasek doesn't want to prolong the suffering of shareholders.

The option to redeem lies with the issuer and the mandatory conversion only happens at maturity (so only way to prevent that is for SIA to redeem prior). Your post seems to suggest that Temasek will ultimately be the one deciding what is going to happen and not SIA. Is that due to the majority shareholding they hold? Isn’t the company supposed to do what’s best for shareholders and not pander to a portion of the investors? This is a rather unfair thought process if true and disadvantages OPMI. There is a corporate governance issue at hand as well if that’s the case.

[karlmarx]

The option to redeem lies with the issuer and the mandatory conversion only happens at maturity (so only way to prevent that is for SIA to redeem prior). Your post seems to suggest that Temasek will ultimately be the one deciding what is going to happen and not SIA. Is that due to the majority shareholding they hold? Isn’t the company supposed to do what’s best for shareholders and not pander to a portion of the investors? This is a rather unfair thought process if true and disadvantages OPMI. There is a corporate governance issue at hand as well if that’s the case.

How does the redemption or conversion of MCBs advantage SIA controlling shareholders? 

How does the redemption or conversion of MCBs disadvantage SIA minority shareholders?

The MCBs and share issue ensure that SIA will be able to remain a going concern. So at least minority shareholders -- both before and after the corporate action -- are assured that their capital will not go down to zero, although it may lose much of its value. 

The trade-off for this security is that minority shareholders will face either ownership dilution or no/low dividends; the MCBs are a loan that needs to be repaid in either of the two ways. There is no free lunch.

So it is not apparent to me how the MCB (or share issue) corporate actions may materially benefit one group of shareholders more than -- or at the expense of -- the other. I will be happy to consider other views which may convince me otherwise.

===

I don't profess to actually know how SIA or Temasek makes their decisions. But it should be clear that they are not uninterested parties who are making arms-length transactions. So there is probably more consensus than conflicting views/agendas in the boardrooms; they are more likely to see themselves to be on the same team than otherwise. After all, are these executives not cut from the same cloth?

Lengthy paragraphs on corporate governance policies and principles are an ideal, and although there is an effort to strive in the 'correct' direction, what should be does not always reflect -- or even approximate -- what is. And this applies to every other institution. Religious leaders are not supposed to sexually abuse their members, but they do. Political leaders are not supposed to steal national resources, but they do. Public company executives are not supposed to be able to walk away when they misuse company resources, but they do. And so on.

Anyway, this point is probably moot. Because, as mentioned, it is not apparent to me how the controlling shareholders are in some ways taking advantage of minority shareholders, whatever the decision (whether redeemed or converted) is taken for the MCBs.