The Fiji National Provident Fund has today confirmed that it has invested $93.1 million for a 30.02 percent stake in Fiji Airways as part of a broader strategy to capture the travel component of the tourism value chain, in addition to the hotels that it already owns.
FNPF CEO Viliame Vodonaivalu says to date, FNPF members have gained $92 million in interest from the lending agreement with Fiji Airways.
Vodonaivalu says now that FNPF owns shares, the members will also gain from returns that the airline would make in this post-pandemic growth cycle.
The CEO says the Fund’s investment follows an intensive due diligence process that started in September last year, conducted by reputable local and international firms with extensive knowledge of the aviation industry and expertise in the areas of valuation, deal advisory, financial and tax due diligence, legal due diligence, technical due diligence and peer review.
He says the team of experts, led by ANZ Corporate Advisory out of Australia, included IBA - one of the world’s leading aviation advisors, Australian law firm Norton White, a leader in transport law, McGrathNicol, Hall & Wilcox, Howard’s Lawyers and Molony Advisory, who are all leaders in their fields.
Vodonaivalu says Fiji Airways has always been on their radar - they saw this as an opportunity and believe that there will be full recovery of FNPF’s investment, given that this strategic national asset has high return potential both in interest income and capital appreciation, apart from the obvious tourism synergies.
He adds that Fiji Airways is an enabler to other investment opportunities such as medical tourism, aged-care and commercial agriculture ventures for export, whilst also having a synergistic relationship with FNPF’s substantial hotel portfolio.
Vodonaivalu says the Fund’s strong investment performance noting that FNPF was the only local financial institution that was able to pay an interest of 5 percent and more during the pandemic.
He says FNPF has a history of providing good returns - this means they make solid investments, and this is why they are able to consistently pay out good interest rates to members.
The CEO says in terms of performance, the Fund recently credited a total of $371 million to 392,175 member accounts after the Board declared a 6 percent crediting interest rate for its members for the fiscal year ending 30th June 2022.
FNPF has to date paid over $1.6 billion in interest for the last 5 years to its members and is now an institution with total assets of over $8.2 billion.
The People’s Alliance has called on the Government for transparency in the sale of Fiji Airways shares and Party Leader, Sitiveni Rabuka is urging the Prime Minister Voreqe Bainimarama to wake up and take control of his Minister for Economy who seems hell bent in treating the FNPF as his own petty cash.
In a statement, Rabuka is asking how could anyone sell off shares of Fiji Airways just like that because the last time they checked, the Government used to own 51 percent of the airline, so if the Fiji National Provident Fund now owns 30.02 percent and Unit Trust of Fiji 1.58 per cent, at what price were these new shares sold for and was an independent share evaluation done.
He asks if this was a sneaky way to redeem FNPF of debts owed by Fiji Airways.
The former Prime Minister says, however these shares were transacted, the question remains if the other shareholders were consulted, specifically the other major shareholder, Qantas.
Rabuka adds that the Managing Director of Fiji Airways Andre Viljoen should be the last person to be making such a huge announcement, for the ramifications of such a sale would be felt for years to come, long after he has left the country.
He says this is the hallmark of a government that has overstayed its welcome as it thrives in cloak and dagger dealings and matters that are of the nation’s interest are decided devoid of transparency and good governance.
He further says it seems to think that these strategic assets of the state are its own, and owed no explanation to anyone.
Rabuka also raised his concerns about the conflict of interest that many board members of Fiji Airways have with people like Daksesh Patel and Sanjay Kaba appointed to more than one board.
He questions Bainimarama on his widely reported ultimatum that no one person should be a member of more than one board.
The People’s Alliance Leader says the Government sold off shares in Energy Fiji Limited and now they have pounced on Fiji Airways.
He says this is an unhealthy state of affairs and it is worrying as it is disconcerting.
Rabuka is urging Bainimarama to institute a commission of inquiry to look into the affairs of Fiji Airways, as his Minister for Economy seems to have a very dim view of the world acclaimed practices of transparency and accountability.
We have reached out to Bainimarama and Aiyaz Sayed-Khaiyum to respond to the People’s Alliance statement and they are yet to respond.
The pension fund of the workers held in FNPF is for their retirement and must be protected from predators.
This has been highlighted by Fiji Labour Party Leader, Mahendra Chaudhry as he denounces the lack of transparency in the manner in which FNPF has acquired 30.02 percent shares in the debt-riddled national airline Fiji Airways.
Chaudhry says the entire exercise is highly questionable and the acquisition was announced indirectly by the airline’s CEO Andre Viljoen when he mentioned the airline has three new directors on its board, two of them from FNPF which had bought equity into the airline.
Chaudhry says he sees it as a direct debt-to-equity swap because no organisation in its right mind would think of investing in an airline at this time as it is too risky.
He asks, given the significance of the acquisition, why has there been no direct statement either from the government or the FNPF regarding the sudden move.
He further says people of Fiji will recall a statement by Economy Minister Sayed-Khaiyum in Parliament in May 2021 during a debate on government’s extension of the debt guarantee to the national airline.
Chaudhry says Sayed-Khaiyum had said FNPF can take all 51% shares that the Fijian government holds in Fiji Airways in the event the airline defaults on its loan repayments.
He also says it is well known that the airline was having difficulties with repayments and in 2020 it was granted a year’s moratorium which has since been extended to 2023.
He says this raises the question whether the board was directed by higher authorities to invest in the airline in order to avoid a call on the government guarantee.
He says fund members are in the dark as to how much was paid to acquire the shares and whether a due diligence was done by the Directors to comply with their fiduciary responsibility to the members.
The former Prime Minister adds the manner in which government is using the FNPF to bail out quasi government companies in financial trouble is deplorable.
Minister for Economy, Aiyaz Sayed-Khaiyum is yet to respond.
We are calling on the Board of the Fiji National Provident Fund to clearly explain to members of the Fund the basis of its decision to buy shares of Fiji Airways as the risk involved is massive and greater transparency is necessary.
This is according to the National Secretary of Fiji Trades Union Congress, Felix Anthony says who says the CEO of Fiji Airways has so casually announced about the purchase which is simply shocking and unanticipated.
Anthony says there has been no word from the FNPF Board on the decision to purchase shares nor has there been any information forthcoming on whose shares have been purchased or has the Fiji Airways debt to FNPF been converted to shares to make the Fiji Airways books look good.
He says all these deals appear to have been made in secrecy without proper due diligence and the fact that workers’ money is being expended to save the airline.
Anthony says this is being done at a time when all airlines around the world are struggling to keep afloat coming out of a pandemic.
He says they have not heard of any workers’ superannuation scheme investing in airlines more particularly at a time like this.
Anthony says the FNPF does not recognize that it is workers’ funds that they are trustees of and not an extension of the Ministry of Economy.
It is only fair that the people know what is the total sum of money that the workers of Fiji have pumped into Fiji Airways, inclusive of loans and the latest acquisition of 30.02 percent shares by FNPF, without their knowledge or any input whatsoever in the decision to invest in the airline.
Those are the words of National Federation Party Leader, Professor Biman Prasad while reacting to the announcement that FNPF now owns 30.03 percent of shares Fiji Airways.
Professor Prasad also says FNPF has now become the second largest shareholder in the airline that will enjoy a 7 year repayment holiday of workers’ money through FNPF. This repayment holiday comes to an end in 18 months.
He also questions why is the FNPF’s acquisition of the shares in Fiji Airways clouded in financial secrecy and lacking complete transparency and accountability to the workers of Fiji who own the Fund.
The NFP Leader says this deal raises more questions that needs clarity as soon as possible.
Professor Prasad says the first question that needs clarity is the role of the Attorney-General and Minister for Economy in this deal as he quickly jumped to comment and say this should have happened much earlier.
He says here is a Minister whose multiple portfolios make him responsible for both FNPF and Fiji Airways.
Professor Prasad asks why cannot Aiyaz Sayed-Khaiyum be upfront and disclose how much FNPF paid to acquire 30.02 percent shares in the airline.
He also asks whether it is true that FNPF has bought the shares for $96 million just to help Fiji Airways raise more cash.
The NFP Leader also says there is confusion as to whether these are issues of new shares as stated by the airline or existing ones.
He says we are now told that Government holds 51 percent of shares but on 22nd October, 2021, the Economy Minister told parliament while seeking an additional guarantee for Fiji Airways that Government now owned 74.56 percent of the entire share capital, with Qantas Airways Ltd shares reducing from 46 percent to 24.04 percent while 1.4 percent were held by the rest.
Professor Prasad says the people of Fiji particularly the workers as owners of the Fund have a right to know what is the amount of Fiji Airways’ debt portfolio with FNPF.
He says while the FNPF Annual Reports do not state the exact amount owed by Air Pacific (trading as Fiji Airways), is it true that around $200 million is still owed to FNPF.
He further says the FNPF 2021 Annual Report also talks of a 7 year moratorium granted to Fiji Airways on loan repayment, which will end in December 2023.
Professor Prasad says the report defines the need for a moratorium on a loan portfolio, when it becomes a case of credit risk and default.
By: Vijay Narayan
Frankly I’m surprised that FNPF did not participate as a shareholder much earlier because any person looking at long term investments and a quick rate of return would have invested in Fiji Airways a long time ago, in particular post the pandemic.
That’s the comments of Minister for Economy, Aiyaz Sayed-Khaiyum following the announcement that FNPF is now the second largest shareholder, holding 30.02 percent of shares in Fiji Airways after the Fijian Government which holds 51 percent of shares in the airline company.
This is part of Fiji Airways Equity Capital Raise of FJ$200 million by issuing new shares.
Sayed-Khaiyum says strategically, this would be a great investment for FNPF.
Sayed-Khaiyum says the airline is run very well, and in the future the aim is to find more strategic partners. He also says Government has also given the largest guarantee any Fijian Government has given as it was critical to support our national airline.
The Minister says you have to ensure that you have a national carrier that brings the bulk of tourists to Fiji.
Airways Managing Director and CEO, Andre Viljoen says they also welcome new board members, Fijian government appointed director, Avi Raju who is FijiCare’s Group Executive Director, and FNPF appointed directors Daksesh Patel and Sanjay Kaba.
Viljoen says Fiji Airways has been working tirelessly even before international travel resumed on December 1st last year, to be ready for the return of tourists and he can confidently say that they are well on the way to reaching new heights as Fiji’s national carrier.
He says in the months just prior to COVID they were celebrating 10 years of successive growth in passengers brought to Fiji, achieving annual revenue of FJ$1 billion for first time, and 10 years of successive profitability.
The CEO says on 1st April 2020, they suddenly faced unprecedented daunting challenges.
As a result of border closures all their domestic and international passenger services were suspended (and their aircraft put into short term storage); revenue dropped to almost zero; their recurring monthly fixed costs payments totaled FJ$39 million; they had limited cash reserves that would at best cover the next 4 to 5 months payments; they were faced with the stressful ongoing uncertainty of when flying would resume and what ramp-up back to normal will look like.
They also had to implement immediate Cash Preservation actions that reduced their monthly recurrent fixed cost payments down from FJ$39 million to FJ$25 million which included many necessary tough measures such as terminating 50 percent of their workforce.
Viljoen says they had requested the Fijian Government for support for financing requirements to 1st April 2021 and very slow restart thereafter. He says they are very grateful for the long term Government Guarantees of Fiji Airways totaling FJ$561.4 million; ensured they obtained long term financing of 15 years and payment moratoriums for the first 2 to 4 years; raised FJ$410.9 million new Debt and 7-year extension of existing loans for the airline company; arranged Aircraft rental payment deferrals which are being repaid over 6 years; prepared contingency measures if resumption of flying was delayed further beyond 1st April 2021; further finance of FJ$50 million to FJ$100 million to be raised and Equity Capital Raise of FJ$200 million by issuing new shares.
Viljoen says their Commercial Team focused on being Commercial Ready by utilizing the government of Fiji’s FJ$40 million Travel Recovery program to create 100,000 enticing Holiday Packages in partnership with the Hotels to kick start travel demand from 1st October 2021. He says this without doubt contributed to the ongoing demand we see today.
He says bookings for the 6-month period June to November is growing 6 percent week on week.
Total bookings held for this period are 365,847 compared to 334,767 in 2019 (9.3% ahead). These bookings exclude markets Fiji Airways is currently not yet operating to such as Hong Kong, Japan and the South Pacific countries.
He says they are also pleased to announce they have prepaid 50 percent totaling USD$32.5 million of one of their major COVID borrowings.
We have sent questions to FNPF and Fiji Airways on the purchase of the shares.
We have asked FNPF what is the total dollar value of shares bought by FNPF in Fiji Airways, what was the basis of the decision to invest in Fiji Airways, when does Fiji Airways expect to turn things around based on results, to deliver profits, and then dividends to shareholders, what is the expected timeline for the shareholders to start getting a return through profits and what is the FNPF's thoughts on going to it's members for consultations before investing in companies.
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