KUALA LUMPUR, October 18 (Reuters) – AirAsia X Bhd (AAX) (AIRX.KL) proposes to pay only 0.5% of the debt owed to each of its creditors and to terminate all existing contracts in order to be able to restructure 33 65 billion ringgit ($ 8.1 billion) in liabilities, according to a document seen by Reuters.
Malaysian low-cost long-haul airline, a sister company of cash-strapped AirAsia Group Bhd (AIRA.KL), said in a stock document on Monday that it had set November 12 as the date for the meetings. creditors to vote on the restructuring proposal.
“To avoid a liquidation and allow the airline to fly again, the only option is for AAX to undertake the proposed debt restructuring,” the airline said in a 127-page explanatory statement for the creditors meeting seen by Reuters.
Half of the total liability is the cost of terminating aircraft orders from its largest creditor Airbus SE (AIR.PA) for 78 A330neo widebody and 30 A321neo widebody, according to the document. Read more
AAX also proposed that if it obtains more than 300 million ringgit ($ 72 million) in annual profit before interest, taxes, depreciation and amortization, rents and restructuring charges in its fiscal years 2023-2026, all creditors, with the exception of Airbus, would be entitled to 20% of these earnings.
It is one of many carriers in the Asia-Pacific region to have started a court-supervised debt restructuring process to survive the pandemic. Others include Malaysia Airlines, Virgin Australia, Thai Airways, and Philippine Airlines.
The 0.5% of the debt owed to each creditor will be paid from operating cash flow one year after the debt restructuring takes effect, the airline said in the document.
AAX also said it was in negotiations with the lessors of 29 aircraft and certain other creditors on commercial terms for ongoing or future business relationships.
It gives lessors the option of continuing to lease aircraft from AAX under new conditions or to accept the termination of the lease and have the aircraft concerned returned. Two lessors have already indicated that they want to terminate the leases, AAX said in the document.
The airline added that its plan aims to achieve a sustainable corporate and debt structure and strengthen the group’s financial position.
To obtain approval for its proposal, AAX needs the approval of creditors holding at least 75% of the total debt value in each of the three categories of creditors.
Airbus, which on its own forms a category of creditors, declined to comment, citing the ongoing restructuring process.
AAX said several other creditors, including suppliers and lessors, had already indicated they were in favor of the proposal. AXA CEO Benyamin Ismail told Reuters in September that all creditors have indicated they want the airline to restructure. Read more
The airline plans to raise 500 million ringgit after restructuring its debt through a rights issue and share subscription.
AirAsia and its founders own around 43% of AAX. AirAsia this month struck a deal with Airbus to restructure an order for 362 narrow-body planes. It also received approval from Malaysia’s only financial guarantee issuer for a loan of up to RM500 million with an 80% government guarantee. Read more
($ 1 = 4.1560 ringgit)
Reporting by Liz Lee in Kuala Lumpur and Jamie Freed in Sydney; Editing by Edwina Gibbs
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