Malaysia's AirAsia X seeks to stave off liquidation with US$15 billion debt restructuring

KUALA LUMPUR: Malaysia's AirAsia X Bhd , the long-haul arm of AirAsia Group Bhd, said it wants to restructure US$15.3 billion of debt and slash its share capital by 90 per cent to continue as a going concern.

Hard hit by the COVID-19 pandemic as closed borders have left most of its planes grounded, the budget airline said it has severe liquidity constraints and, with no return to normalcy in sight, "imminent default of contractual commitments will precipitate a potential liquidation". 

Its statement late on Tuesday (Oct 6) came just days after Malaysia Airlines, the country's other major carrier, said it was very low on cash and had reached out to lessors, creditors and suppliers for urgent restructuring.

READ: In bid to survive and restart, Malaysia's AirAsia X proposes major restructuring plan

AirAsia X is seeking to reconstitute 63.5 billion ringgit (US$15.3 billion) of debt into a principal amount of 200 million ringgit and for the balance to be waived.

That debt restructuring as well as a revamp of its business model would be needed to raise fresh equity and debt, which in turn would be required to restart the airline, it said.

The statement did not break down the liabilities or name the airline's creditors.

AirAsia X declined to respond to a Reuters' query regarding its debt.

The hefty debt figure could include aircraft orders, potentially spelling cancellations, said an aviation analyst who declined to be identified as he no longer covers the company.

"A lot of that may be aircraft orders. The real haircut may not be that huge if it's purely on actual debt and lease commitments," he said.

AirAsia X last year finalised orders with Airbus SE for 78 A330neo and 30 A321XLR planes but said in February this year it would defer delivery of the A330neo planes and consider other changes to reduce its fleet. The airline is Airbus' biggest customer for the A330neo.

It also proposed reducing its issued share capital by 90 per cent and consolidating every 10 existing ordinary shares into one share. Long a penny stock, its shares fell 10 per cent to 4.5 sen on Wednesday.

The airline, which reported a record net loss of 650.3 million ringgit in the 2019 financial year, said unaudited records as of Jun 30 showed it had a shareholder equity deficit of 960 million ringgit.

Liabilities of 3.38 billion ringgit exceeded assets of 1.39 billion ringgit.

It has appointed board member Lim Kian Onn, a chartered accountant and former banker, as deputy chairman to lead the restructuring which will involve overhauling its route network, fleet size, cost base and workforce.

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