FNPF soaks up unwanted Fiji Airways shares, buys 30% of airline for F$93.1m

Viliame Vodonaivalu

The Fiji National Provident Fund (FNPF) has confirmed its acquisition of 30.02% of Fiji Airways was an outright F$93.1 million purchase of new shares and not a debt-to-equity swap as had been widely speculated since news broke this week that it was a new shareholder in the national airline, along with the Unit Trust of Fiji.

“It is not, let me repeat, it is not a debt-to-equity swap of the commercial loan that the airline took from FNPF several years ago. No! That loan continues to run its full term with the conditions being followed to the letter; while this is a new capital injection into our national carrier,” FNPF CEO Viliame Vodonaivalu said in a media conference yesterday morning.

He confirmed to Islands Business that the shares purchased by FNPF were those not taken up during a capital-raising exercise by Fiji Airways last year, in which new shares were issued and offered to shareholders on a pro rata basis.

The Fiji Government, according to Hansard records from October last year, had exercised its options, raising a total of $102 million for the airline, of which $94.4 million went back to the Government as a one-off payment fee for the government-guaranteed $561.4 million loans facility made available to the company to keep it on its feet during the lockdowns.

The rest of the shareholders – Qantas, Air New Zealand, the Governments of Kiribati, Tonga, Samoa and Nauru – did not exercise their options, said Vodonaivalu.

“We bought the ones that actually didn’t take up their rights under the rights issue.  That’s the ones we acquired.  Government took up theirs but a number of existing shareholders didn’t. That was when they approached the market for willing and intent buyers.”

FNPF soaked up 30.02% while Unit Trust of Fiji took on 1.6%.  

The purchase takes FNPF’s total exposure to Fiji Airways alone (debt and equity) to F$331.5 million or 3.9% of its overall investment portfolio of F$8.5 billion.

It also perfectly complemented the Fund’s investment activities in the tourism sector, which accounts for 8 percent of its total portfolio, said Vodonaivalu.

“Fiji Airways was one of the sectors that had been on our radar for quite a significant period.  And when it came, it was a blessing for us.  Again I’m referring to value chains.  Our intention is to control the cycle right from airlift to our hotel.  So if you don’t believe in the airline then you can’t believe in the hotel,” he said. 

However the purchase has stirred up controversy and speculation from critics who pointed out a lack of transparency surrounding the deal. 

“Why is the Fiji National Provident Fund’s acquisition of 30.02% shares in Fiji Airways clouded in financial secrecy and lacking complete transparency and accountability to the workers of Fiji who own the Fund,” said National Federation Party leader Biman Prasad.

The Fiji Trade Union Congress, Fiji’s biggest federation of trade unions representing  70% of Fiji’s working population, labelled as “shocking and unanticipated” the “casual” announcement by Fiji Airways CEO of the purchase by FNPF, which he did while announcing the airline’s new direct flight  to Vancouver.   

“There has been no word from 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? 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,” said FTUC National Secretary Felix Anthony prior to yesterday’s media conference. 

Vodonaivalu dismissed the claims, stressing the decision to buy into Fiji Airways was neither forced on the Fund, nor was it made overnight.

“Rather this investment is a result of exhaustive due diligence procedure that began in September of last year, conducted by renowned local and international consultants with considerable expertise of the aviation sector. These included experts in valuation, acquisition advising, financial and tax due diligence, legal due diligence, Aviation technical due diligence, and also due diligence was peer reviewed by independent specialists,” he said.

The pension fund, whose members are Fiji’s working population, has been under constant pressure from the public ever since its high profile loan of F$200 million to the national airline in 2013 for the purchase of  three new Airbus aeroplanes.