AirAsia converts amount due from Indonesia AirAsia into debt notes

KUALA LUMPUR: AirAsia Bhd has converted part of the existing amount due from by its affiliate PT Indonesia AirAsia (IAA) by subscribing for the 2,058 bil rupiah rupiah perpetual capital securities issued by the latter.

The low-cost carrier had on Thursday said the 2,058bil rupiah was the 49% of the securities issued by IAA. The portion was based on its 49% stake which it owns in IAA.

The total amount due from IAA as of June 30, 2015 was 4,280 bil rupiah. 

Hence, AirAsia had on Sept 29, 2015, entered into a perpetual security purchase agreement with IAA to formalise the issuance and terms and conditions between IAA and AirAsia over the subscription. 

Highlights of the perpetual capital securities include:

a. Direct, unsecured and unsubordinated obligations of IAA and ranks ahead of IAA’s other share capital instruments or securities for the time being outstanding; 

b. Carry an initial periodic distribution rate of 12% per annum which is payable semi-annually; 

c. Perpetual in tenure, with IAA having a call option to redeem the perpetual capital securities at the first call date, which is at the end of the seventh year from date of issuance and on each subsequent periodic distribution date thereafter at their principal amount; 

d. The periodic distribution rate will step-up by 5% if the perpetual capital securities are not redeemed at the first call date; 

e. Periodic distributions on the perpetual capital securities can be deferred (in part of in full) at IAA option, where the deferred periodic distributions are cumulative and compounding; 

f. Should the periodic distribution is deferred, IAA will not be able to (i) declare or pay any discretionary dividends, distribution on junior or parity securities or (ii) redeem, cancel, buyback any of its junior or parity securities; 

g. The applicable periodic distribution rate will step-up by 5% should IAA breach the covenants in the terms and conditions of the Perpetual Capital Securities. Upon covenant breach, IAA has a call option to redeem the Perpetual Capital Securities at 101 per cent of the principal amount plus accrued distributions; 

h. The perpetual capital securities will not be rated and will not be listed in any stock exchange; and

i. The perpetual capital securities may also be redeemed by IAA upon the occurrence of certain events as more particularly detailed in the terms and conditions of the Perpetual Capital Securities; 

AirAsia said the subscription price was based on IAA’s current financial profile, benchmarked against recent corporate bond issuance by other Indonesian corporations and also the current interest rate on the amount due from IAA. 

Currently, AirAsia Investment Ltd, a unit of AirAsia, and PT Fersindo Nusaperkasa each hold 49% and 51% equity interest respectively in IAA.

As at Sept 30, 2015, IAA's issued and paid-up was 180,000 bil rupiah or RM54.72mil comprising 180,000 ordinary shares of 1mil rupiah each (based on exchange rate being IDR100 : RM0.0304).

Based on the audited financial statements of IAA for the financial year ended Dec 31, 2014, the negative equity of IAA was 3,181 bil rupiah.