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AIRASIA (5099) AIRASIA GROUP BHD proposes two-for-six rights issue of convertible Islamic debt securities to raise up to RM1.02b

KUALA LUMPUR (July 12): AirAsia Group Bhd is making a cash call to its shareholders to raise up to RM1.02 billion to recapitalise the low cost carrier that is hard hit by the Covid-19 pandemic, like its peers in the aviation industry.

The airline has proposed to undertake a renounceable two-for-six rights issue of redeemable convertible unsecured Islamic debt securities (RCUIDS), on a basis of two RCUIDS with one free detachable warrant for every six AirAsia shares held.

Each RCUIDS will be priced at a nominal value of 75 sen apiece. The RCUIDS come with a seven-year tenure and a profit rate of 8% per year. Each RCUIDS are also convertible to one new AirAsia share on a one-to-one basis, according to the filing to Bursa Malaysia.

AirAsia is seeking unconditional and irrevocable written undertakings for a full subscription from co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, as well as their investment vehicles Tune Live Sdn Bhd and Tune Air Sdn Bhd.

Tune Air owns 13.25% in the company, followed by Tune Live with 13.06% stake. Fernandes and Kamarudin respectively hold 0.04% and 0.05% direct stake in AirAsia.

Collectively, the duo, who control 26.40% equity interest, are expected to pump in RM257.27 million fresh capital.

The carrier’s other substantial shareholder is Hong Kong investor Stanley Choi, with 8.72%, who subscribed to its private placement this year.

“The proposed rights issue is also undertaken in response to a series of unexpected events outside the group’s control, primarily attributed to the outbreak of the global Covid-19 pandemic, which has created significant challenges for the airline industry,” AirAsia said.

Aside from the four shareholders’ undertaking, AirAsia also plans to arrange the underwriting for at least 50% of the remaining portion of the RCUIDS not undertaken by them.

The undertakings and the underwriting will make up RM615.89 million of the proposed fund-raising, the filing showed.

“The RCUIDS holders shall have the right to surrender the nominal value of the RCUIDS (outstanding amount) for conversion into new AirAsia shares at any time during the conversion period at the conversion price,” the filing said.

AirAsia shall also redeem 25% of the RCUIDS each year from the fourth year onwards.

On the warrants, AirAsia said it intends to fix the exercise price to be the lower of either RM1, or 20% premium to the trailing 30-day volume-weighted average price of AirAsia shares prior to the announcement of the entitlement date later.

From the proceeds, AirAsia plans to spend about half to fund the general working capital of the carrier including staff-related costs, variable costs, IT operating expenses and other general requirements.

Meanwhile, it will allocate between 10% to 12% for AirAsia Digital’s business, namely its marketing and expansion costs, as well as other technology developments.

The remaining balance will be earmarked for fuel hedging settlement and aircraft lease and maintenance payments, the company said.

As of June 29, AirAsia has 3.898 billion issued shares, the company said. It has yet to issue the remaining 198.18 million new shares under its proposed private placement in February, it added.

Shares of AirAsia closed at 88.5 sen, valuing the airline at RM3.43 billion.

The rights issue is part of AirAsia’s plan to raise up to RM2.5 billion to fund its operations as the aviation industry is crippled by the border closures amid the Covid-19 pandemic.

The budget airline is targeting to operate approximately 35%-45% of its 2019 pre Covid-19 capacity by the end of 2021, with thereafter the corresponding ramp-up in its flight schedule to normalcy.

Meanwhile sister company AirAsia X is also planning to raise up to RM500 million via a cash call from existing shareholders and private placements to new investors — on top of a share capital reduction exercise and a proposed restructuring of some RM2 billion in liabilities.


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