KUALA LUMPUR (Aug 22): Low-cost airline Capital A Bhd said on Thursday that it has secured a US$443 million (RM1.9 billion) revenue bond to refinance AirAsia Bhd's (AAB) lease liabilities, cover aircraft and engine maintenance costs and support its working capital needs.
The private financing will be provided in two tranches. Ares Management Corp and Indies Capital Partners will contribute US$200 million, which will be strategically used to reactivate aircraft grounded during the pandemic.
The remaining US$243 million tranche, subscribed by existing aircraft lessors, will be used to refinance current lease liabilities, further strengthening the company's balance sheet.
In a bourse filing, the group said its wholly-owned subsidiary, AirAsia RB 1 Ltd (AARB1), had entered into definitive agreements to issue secured notes worth up to US$443 million, due in September 2026 and August 2028.
AAB will serve as a third-party security provider, with both AAB and Capital A acting as corporate guarantors for the issuance.
Capital A stated that the revenue bond is secured by corporate guarantees from both Capital A and AAB, and various securities provided by AAB.
These include a corporate guarantee from Capital A, valid only until its reorganization is completed in 2024, and a corporate guarantee from AAB, as the holding company of AARB1.
Additionally, there is a first-ranking charge over AAB's revenue from specified routes, a floating charge over sub-accounts receiving revenue from non-AirAsia Move channels, and a first-ranking share charge over 100% of AARB1 shares.
Except for Capital A's guarantee, all securities will remain valid throughout the bond's term.
Evercore Asia (Singapore) Pte Ltd serves as the exclusive financial adviser to Capital A for this transaction, alongside international legal adviser A&O Shearman and local legal adviser Christopher & Lee Ong.
Capital A chief executive officer Tony Fernandes said that securing the US$443 million revenue bond represents a significant milestone, reflecting strong investor confidence in the company's future.
"The extraordinary general meeting documents have been submitted to Bursa Malaysia, awaiting review and approval. Once approved, we will see the emergence of two companies — Capital A and AirAsia Group — both free from PN17 status," he added.
Group CEO of AirAsia Aviation Group Bo Lingam commented that the revenue bond is timely in strengthening AirAsia's financial position and liquidity. "With growing travel demand, we will use this funding to expand and reactivate our fleet and refinance lease liabilities, leading to a more robust balance sheet. We plan to reactivate 10 aircraft in October, with an additional 15 to follow in 2025," he said.
Shares in Capital A rose 3.5 sen or 4.61% to 80 sen at Thursday's market close, valuing the company at RM3.42 billion.
Source: TheEdge - 23 Aug 2024
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