AirAsia X announces debt and corporate restructuring

KUALA LUMPUR: AirAsia X Bhd (AAX) has announced a group-wide debt and corporate restructuring scheme, as the cash-starved budget airline seeks to avoid liquidation and restart some flight operations early next year.

"To avoid a liquidation and to allow the airline to fly again, the only option is for AAX to undertake a group-wide debt and corporate restructuring and update its business model to survive and thrive in the long term," AAX said in a filing with Bursa Malaysia today.

"The right-sizing of the Group's level of operations and its financial obligations are pre-requisites for the raising of any fresh capital, comprising both equity and debt, that will be used to support the implementation of the Group's revised business plan," it said.

As of end of June, the Group had an unaudited deficit in shareholders’ equity of RM960mil and its unaudited current liabilities of RM3.38bil exceeded unaudited current assets of RM1.39bil by RM1.99bil.

"Based on its current financial position and the industry outlook, the Group will not be able to meet its immediate debt and other financial commitments," it said.

AAX said that prior to this announcement, the Group embarked on a cost containment exercise that included grounding all scheduled flights, salary cuts and retrenchment across the group.

The restructuring, it said, will provide new opportunities for the Group to transform and reset its business.

"Going forward, AAX will strive to rebound as a low-cost medium haul airline with a leaner and more sustainable cost base while focusing on building business sustainability, growing yield instead of market share and compete in a more rational pricing environment," it said.

It hopes to restart operation with 2 aircraft in selected markets in the first quarter of 2021 and to gradually resume flights to all destinations by end-2021.

The proposed a debt restructuring scheme with unsecured creditors of the Group pursuant to Section 366 of the Companies Act, 2016 entails the following:-

(a) a restructuring of approximately RM63.50 billion of debts to be reconstituted into an acknowledgement of indebtedness by AAX for a principal amount of up to RM200.0 million; and

(b) any balance in excess of the above mentioned reconstituted amount and all other sums after the cut-off date as at 30 June 2020 arising from these debts (including interest, penalty interest etc) shall be waived.

AirAsia X has also proposed a corporate restructuring involving a capital reduction and share consolidation as follows:-

(a) a proposed reduction of 90% of the issued share capital of AAX pursuant to Section 116 of the Companies Act, 2016

(b) a proposed consolidation of every 10 existing AAX shares into 1 AAX share.

"The completion of the Proposals is key to the survival of the Group as well as its ability to remain a going concern," it said.

"In order to implement the Group’s revised business plan, AAX will require significant concessions from its suppliers, creditors and financiers. The Group will also require fresh debt and equity capital but without right-sizing the Group’s financial obligations and its financial position, it will not be possible to raise the new funding required to reset the airline," it added.

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