AirAsia evaluating proposals to raise capital

The AirAsia Group is evaluating proposals to strengthen its equity base and liquidity through a capital raising exercise, as it works to overcome challenges caused by the coronavirus pandemic.

The AirAsia Group is evaluating proposals to strengthen its equity base and liquidity through a capital raising exercise, as it works to overcome challenges caused by the coronavirus pandemic.

In a 4 June Bursa Malaysia disclosure, the group says it has been presented with proposals from “investment bankers, lenders, as well as potential investors to help the company weather the storm caused by the Covid-19 pandemic”.

In addition, the airline has “ongoing deliberations” with several parties for joint ventures and collaborations, which may lead to “additional investments in specific segments of AirAsia Group’s businesses”.

However, AirAsia says it would not disclose information on the proposals, citing confidentiality.

AirAsia Group made the disclosure in response to a 4 June article by Malaysian newspaper The Star, which reported that the low-cost operator is in talks to sell a 10% stake to South Korean conglomerate SK Group through a private placement. SK Group subsequently confirmed those talks to South Korea’s Maeil Business Newspaper on 5 June, adding that it had yet to decide whether to make the equity purchase.

The Star report adds that the Malaysian government is looking at arranging a MYR1.5 billion ($352 million) cash injection into three local carriers, including AirAsia, to help the Malaysian airline industry “prepare for operations post Covid-19”.

An unnamed source quoted in the report said that around 80% of the MYR1.5 billion figure will be guaranteed by Malaysian financial guarantee insurer Danajamin Nasional, while the remaining 20% will be “corporate guaranteed”. Cirium has contacted AirAsia for comment.

The pandemic’s impact led AirAsia Group to announce on 29 April that it would evaluate its orders for Airbus aircraft, and not take delivery of any new aircraft for the rest of 2020. Executive chairman Kamarudin Meranun said the company’s decision to sell and lease its aircraft in late-2018 had also given it greater flexibility to reduce growth instead of owning aircraft.

Malaysia AirAsia resumed domestic operations on 29 April, after suspending operations on 28 March.