UK Court approves MAG restructuring to advance to meeting of creditors

by RAHIMI YUNUS / pic by BLOOMBERG

THE UK Court has approved Malaysia Aviation Group, the parent company of Malaysia Airlines Bhd (MAB), to convene a meeting of creditors to consider its proposed restructuring scheme.

The approval, which was granted to its aircraft leasing subsidiary MAB Leasing Ltd (MABL) yesterday, fixed a sanction hearing on Feb 22, 2021, for the outcome of the meeting to be heard.

MABL had issued a Practice Statement Letter to certain groups of its creditors on Dec 23 last year to notify them of the company’s intention to file a scheme of arrangement under Part 26 of the UK Companies Act 2006.

MAG said the UK Court process and the wider group restructuring exercise is expected to conclude by the end of the first quarter this year (1Q21).

“MAG has reached another major milestone towards securing its future today, by successfully obtaining approval from the UK Court to proceed with a major component of the comprehensive restructuring of the group, following the severe impact of the Covid-19 pandemic on the travel and tourism industry globally,” the company said in a statement today.

The group said the restructuring is based on a revised long-term business plan and will pave the way for MAG to ensure its long-term sustainability together with the strong support from its shareholder and the large majority of its creditors.

MAG said it has been in active discussions with all its key stakeholders and managed to obtain overwhelming support to carry out its restructuring after many rounds of intense negotiations.

However, there remains a small minority of creditors that have yet to indicate their support for the restructuring.

The company said with borders closed and aircraft grounded, the aviation industry was most severely impacted and a full recovery is expected only in 2023.

“MAG took decisive actions to reduce costs, preserve cash, transform the business and

realign the long-term aspirations to weather this crisis,” it added.

MAG is negotiating to restructure liabilities estimated at RM16 billion with about 40 creditors and lessors.

With the positive development, analysts were of the view that MAG may not have to proceed with its Plan B to make FlyFirefly Sdn Bhd the flag carrier.

Firefly expansion will proceed by commencing jet operations in 1Q21, with an addition of 10 narrow-body jets to its fleet in phases.

Firefly is also expected to serve the domestic, Asean and Asia Pacific markets out of Penang International Airport.

With the commencement of jet operations, MAG previously said Firefly will be complementing MAB in serving the leisure market while diversifying its base, connecting secondary cities in Malaysia to East Malaysia, Thailand, Indonesia and Singapore.