Alliance Aviation hopes to land $122m capital raising

At a time when airlines are synonymous with financial woes, shares in Alliance Aviation Services (ASX: AQZ) have been flying at record highs after the Queensland Government pledged support for a key Whitsundays flight route.

Amidst the broad sentiment of business reopening, it's probably as good a time as any for Alliance to raise some extra cash.

This morning the Brisbane-based group entered a trading halt before announcing a $121.9 million capital raising to capitalise on "a number of prospective expansion opportunities" that have arisen during the COVID-19 pandemic.

The raising comprises a $91.9 million fully underwritten institutional placement that will dilute existing shareholdings by around 24.4 per cent, followed by a share purchase plan (SPP) aiming a further $30 million.

The placement will be at $2.95 per share, representing a 5 per cent discount to the last traded price on the ASX.

"Alliance's recent performance has been outstanding and allows us to be uniquely positioned to look to expand through a number of growth initiatives," says Alliance's managing director Scott McMillan.

"Importantly, this capital raising will give us the ability to invest in these initiatives whilst maintaining our strong balance sheet.

"Maintaining a strong balance sheet has been the focus of the Board for a number of years and is something we will jealously guard."

The company intends to acquire additional aircraft after the raising, provide additional services to existing customers in response to changes in their air travel requirements due to COVID-19, and continue to provide services to entities that were not long-term customers before the outbreak.

The airline also extended the term of its debt facilities with existing lenders on 28 May, with revolving term loan facilities of $70.2 million and a working capital facility of $5 million extended until January 2022.

"We are pleased to announce that Alliance has been able to successfully extend its debt facilities with our banking partners being the Australia and New Zealand Banking Group and the Commonwealth Bank of Australia until January 2022," says McMillan.

"Completing an extension at this time further cements the strong and long-standing relationship Alliance has with its banking club. We intend to undertake a formal refinancing process in 2021."

Updated at 10:10am AEST on 11 June 2020.