AirAsia to place out shares, market talk on privatisation quashed

Tan Sri Tony Fernandes and his long time partner, Datuk Kamarudin Meranun are forking out RM1.006bil cash to shore up AirAsia Bhd’s balance sheets, something investors have been urging them to do for sometime now.

AirAsia told Bursa Malaysia that it would issue 559 million new shares in a share placement exercise at RM1.80 a share to Tune Life Sdn Bhd, owned equally by both Fernandes and Kamarudin.

This will eventually raise the duo’s direct and indirect stake in the region’s largest low-cost carrier to 32.4% from 18.9% currently. Fernandes is group CEO while Kamarudin the chairman of AirAsia group.

The proceeds from the share sale will be used to reduce debts, pay for aircraft purchases, construct a new building for its headquarters and working capital going forward.

This share placement also pours cold water on market talk on a potential privatisation, at least for now. “AirAsia is our baby and we have been hurt by lack of analysts and shareholder confidence, so we thought we will kill two birds with one stone. Raise the money needed for AirAsia, and show our long-term commitment,’’ Fernandes said in an SMS to StarBizWeek yesterday.

AirAsia has been facing tough times the past six months after a Hong Kong-based research house raised several financial concerns that could have led to the share price tumble.

The share price have since gained ground, closing at RM1.83 a share on Thursday. They were suspended yesterday and will resume trading on Monday.

Early this year, the airline announced a US$1bil multi-currency medium-term note programme to raise funds for the airline, but it was later abandoned.

“The multi-currency medium-term loan failed due to high cost of funding,’’ says Fernandes.

AirAsia, is an airline both Fernandes and Kamarudin bought for RM1 nearly two decades ago. Over the years, both had their focus on growing other businesses but now Fernandes says: “Din (Kamarudin) and I are thrilled and energised to be back driving the AirAsia vision.’’

In the statement to Bursa, AirAsia said of the RM1.006bil, 34% or RM342mil will go to pre-payment and repayment of debts, RM275mil for funding aircraft, spare engines and other aircraft parts and associated pre-delivery payments, about RM103mil for construction and development of AirAsia’s new headquarters at KLIA2, and the remaining amount for working capital and others.

The rational for the share issuance was to enable the airline to raise funds it needs to reduce and prepay its bank borrowings, and in the process its gearing will be reduced from 2.79 times as at end-2014 to 2.22 times after completion of the exercise, which is expected in the third quarter of this year.

The exercise raises AirAsia share base from 2.7 billion shares of 10 sen each to 3.341 billion.

“This will strengthen AirAsia’s balance sheets and increase its financing flexibility,’’ the airline told Bursa.

The airline has RM12.72bil total borrowings, and it will be reduced to RM12.3bil after the completion of the exercise.

Fernandes, however, declines to say how he and Kamarudin will fund the share placement but AirAsia declared on Thursday a first and final dividend of 4% per share.

The issue price will also be adjusted from RM1.84 a share now to RM1.80 a share after the dividends are paid out.

An EGM will be called to get shareholder’s approval on the placement.

Meanwhile, AirAsia will be expanding its services to link Johor Baru with other international destinations such as China and the Philippines soon.

Chief executive officer Aireen Omar said that the next confirmed Chinese destination to fly from Johor Baru would be Guangzhou.

She said the launch and official announcement for the Johor Baru-Guangzhou route would be made by this month.

“We do recognise The Philippines as an important destination and we would like to access the country as part of our growth plan for the next five years.

“Johor is our third biggest hub after Kuala Lumpur and Kota Kinabalu and we want to grow the state into a regional player. Plans are in the pipeline,” she said after welcoming the arrival of its inaugural Hat Yai flight from Thailand at the Senai International Airport, in Johor Baru.

She added that Johor is a growing state and has shown potential for AirAsia to introduce more traffic at the airport.

“In line with that, we also have plans to expand the existing Johor Baru-Bangkok route from the current frequency of four times a week to a daily flight,” she added.

The Johor Baru-Hat Yai direct flight is the sixth international route offered by AirAsia at the airport after Bandung, Yogyakarta, Ho Chi Minh City, Bangkok and Surabaya.

The one hour and 40 minute Hat Yai flight carrying around 100 passengers touched down at the airport at around 2.10pm yesterday and was received by Aireen and Senai Airport Terminal Services Sdn Bhd chief executive officer Md Derick Basir.

Aireen added that the flight marks the beginning of a much-anticipated connectivity between the southern city of Thailand and the southern state of peninsular.

Passengers can enjoy a promotional all-in fare of RM99 until April 10 with a travelling period of from April 1 to Sept 30.

Source:
courtesy of THE STAR

by B.K. Sidhu

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