GUANGZHOU, China ( TheStreet) -- Shares of China Southern Airlines (ZNH) are soaring on Tuesday after an announcement from China's biggest air carrier that it would sell 1.8 billion new shares to raise capital and pay down existing debt.
In Hong Kong, China Southern Airlines' shares rose overnight to their highest level since June 2008.
HSBC Securities raised its rating on China Southern Airlines from underweight to overweight.
In limited trading of China Southern Airlines' ADR shares, the carrier's stock was up close to 17% at midday on Tuesday, with a gain of close to $3 to $20.74. Approximately 85,000 of the thinly traded ADR shares of China Southern Airlines were in play on Tuesday morning, versus an average daily ADR volume of 24,000 shares.China Southern will be among the purchasers of the new shares, in a capital markets strategy that is being supported by the Chinese government as part of its effort to bail out the biggest Chinese airline from a massive cargo load of debt. The deal is far from the first time that the Chinese government is stepping in to help buffer the wings of its biggest air carriers. The parents of Air China and China Eastern Airlines, the nation's No. 2 and No. 3 carriers, have also received state support to pay off debt. China Southern Airlines Company will issue up to 1.8 billion new A shares in Shanghai to 10 specific investors, including its state-owned parent. The company said the price represented a 12% discount to the last five closing-day prices of its Shanghai stock.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV