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KUALA LUMPUR: AirAsia X Bhd (AAX), the long-range arm of AirAsia Group Bhd, said it has proposed to restructure RM63.5 billion of debt and reduce its share capital by 90% to continue as a going concern.
AAX said it has severe liquidity constraints and, with no return to normality in sight, “imminent default on contractual commitments will precipitate a possible liquidation.”
The restructuring of the debt of the entire group and the renegotiation of financial obligations, as well as the update of its business model, are prerequisites for obtaining new capital and debt, which will be necessary to restart the airline, it said yesterday.
In early trading today, AAX’s share price fell 10% to 4.5 sen.
The group, hard hit by the Covid-19 pandemic when closed borders left most of its planes grounded for months, is trying to reconstitute the debt of 63.5 billion ringgit into a principal amount of 200 million ringgit and eliminate balance.
AAX also proposed reducing the issued share capital by 90% and consolidating every 10 existing ordinary shares into one share.
AAX’s announcement comes days after Malaysia Airlines said it had approached lessors, creditors and suppliers for an urgent restructuring due to the pandemic.
Reuters had reported last Friday that the holding company of national airline Malaysia Aviation Group said it told lessors that it will probably not be able to make payments due after November unless it receives more money from the state fund Khazanah Nasional Bhd.
“(AAX’s) creditors could agree on the terms, but they would have to be content with recovering a tiny fraction of their capital,” MIDF Research said in a note to the client today.
The airline said unaudited records as of June 30 showed it had a shortfall in equity capital of RM960 million. Liabilities of RM3.38 billion exceeded assets of RM1.39 billion.
He has appointed board member Lim Kian Onn, a public accountant and former banker, as vice chairman to lead the restructuring.
AAX said its revised business plan involves reviewing its route network, fleet size, cost base and workforce to become a more agile and sustainable business.
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