Finnair will launch a rights issue of up to €600 million this month with the aim to reinstate its dividend from 2025, it said on Friday.
The national Finnish airline’s share price fell by more than 23% on the Helsinki bourse to €0.40 per share (from €0.52) this morning after it announced the rights issue, along with plans to use a majority of the proceeds to pay down debt.
The airline, which is mostly owned by the State of Finland, said it will use net proceeds of the offering to pay the outstanding portion of a €400 million loan.
Finnair said in a statement that it hopes to use the capital to reduce its financing costs and provide money to make future investments as well as drive profit growth.
The company reiterated its operating profit margin target in a separate statement today, ahead of the release of its nine-month interim results, and also released new debt targets and plans to reinstate the dividend.
Its previously announced goal is to reach an operating profit margin of 6% by the end of 2025, with a new target for 1-2x net debt to earnings before interest, taxes, depreciation (EBITDA) by the end of 2025.
Finnair said it plans to "reinstate the company's ability for shareholder distributions from 2025 onwards" and also hopes to be carbon neutral by 2025.
The airline said its targets are based on predictions to boost seat capacity 15% by 2025 with €80 million to €100 million of capital expenditure (capex).
Last month, the company carried out a redemption of its capital securities worth €200 million in the form of a hybrid bond.
The newly announced rights issue will include pre-emptive subscription rights for existing shareholders.
The airline said the State of Finland will pay the subscription price by offsetting against the loan, while its pension investors Varma Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company and Ilmarinen Mutual Pension Insurance Company have pledged to vote in favour of the proposal.
The remaining half of the offering has been underwritten on a standby basis, with the rights issue remaining conditional on shareholder approval to be sought at an extraordinary general meeting on 27 October.
The offering is expected to be completed in the fourth quarter.
Deutsche Bank Aktiengesellschaft and Nordea Bank Abp are joint global coordinators, lead managers and underwriters for the offering.
Topi Manner, Finnair’s chief executive officer, said: “Building a strong balance sheet through the rights offering will further reduce our cost of capital and strengthen our resilience. Very importantly, it will also enable future investments and increase flexibility on actions required to fulfil our long-term carbon neutrality target.”