AirAsia X proposes restructuring of debts

The proposal states that the debts are to be reconstituted into an acknowledgement of indebtedness for a principal amount of up to RM200m

by FARA AISYAH / pic by BLOOMBERG

AIRASIA X Bhd (AAX) has proposed to restructure RM63.5 billion of its debts, as well as a capital reduction as the low-cost carrier battles for survival from the economic distress caused by the Covid-19 pandemic.

With its fleet now in hibernation, the carrier’s proposal stated that the debts are to be reconstituted into an acknowledgement of indebtedness for a principal amount of up to RM200 million.

“The proposed debt restructuring is a comprehensive proposal aimed at enabling the group to address its debt obligations in an orderly manner and to arrive at a debt structure which is sustainable.

“This is key to the survival and going concern of the group, with the debt settlement amount being supported by the group’s revised business plan which focuses on, among others, mature profitable routes, reduced fleet size and restructuring of fixed cost to variable cost to support a gradual recovery of flight operations,” the group noted in its filing yesterday.

AAX also intends to raise up to RM500 million, including making an application for a government guaranteed loan under the Danajamin Prihatin Guarantee Scheme and/or raising funds from equity providers.

The proposed corporate exercise comes as the AirAsia group announced the cessation of its joint-venture operations in Japan on Monday, while news reports suggest the same for its venture in India.

The proposed debt restructuring scheme entails any balance in excess of the abovementioned reconstituted amount and all other sums after the cut-off date as at June 30, 2020, arising from these debts shall be waived.

All existing contracts, agreements and/or arrangements previously entered into with the relevant creditors will be deemed terminated following their approval of the proposed debt restructuring and the High Court’s sanction thereto.

The carrier’s customers and travel agents, who purchased or made advance payments for flights and travel agents which had placed deposits for the purchase of seat inventory, will receive travel credits with extended validity for future travel or purchase of seat inventory.

For the first half of 2020, AAX had an unaudited deficit in shareholders’ equity of RM960 million and its current liabilities of RM3.38 billion exceeded current assets of RM1.39 billion by RM1.99 billion.

Based on its current financial position and the industry outlook, AAX stated that it will not be able to meet its immediate debt and other financial commitments.

The group is also undertaking a corporate restructuring, including a proposed reduction of 90% of the issued share capital and a proposed consolidation of every 10 existing ordinary shares into one AAX share.

As at Oct 5, 2020, the issued share capital of AAX is RM1.53 billion comprising 4.15 billion shares.

The move could see the 4.15 billion AAX shares consolidated into 414.81 million shares pursuant to the proposed consolidation.

The credit arising from the proposed share capital reduction will significantly reduce its accumulated losses.

“This will facilitate AAX’s objective to rebuild the group’s financial position which would then enhance the credibility of the group with various stakeholders; and the proposed share consolidation will reduce the number of AAX shares in issue and correspondingly, increase the reference/trading prices of AAX shares,” the group noted.

It added that the share capital reduction may reduce the volatility of the trading price for AAX shares.

The proposals are expected to be completed by the end of the first quarter of 2021.

AAX share price closed half-a-sen lower at five sen yesterday, valuing the company at RM207.4 million.