KUALA LUMPUR: Capital A Bhd, formerly known as AirAsia Group Bhd, last week failed to secure RM500 million loan from Danajamin Nasional Bhd, which was critical to its RM2.5 billion recapitalisation effort. But aviation analysts outlined three ways for Capital A to offset the setback.

One is of course, to talk to Danajamin again for the loan, with new terms and conditions.

Capital A can also venture into conventional capital markets by way of equities or debt, or a combination of both.

The best way, though, is to go to private investors or foreign banks for the capital injection. 

Analysts said investors could invest in Capital A's subsidiaries to lower risk of exposure rather than investing in the holding company outright.

Pangolin Aviation Recovery Fund director Mohshin Aziz opined that Capital A could do another round of private placement and rights issuance.

"We have seen many airlines in Europe and Asia issued substantial equity surpassing their market capitalisation. So, it can be done. It is dilutive and punitive to existing shareholders, but at least the business can survive and hopefully flourish in the future," he told the New Straitsv Times today.

An aviation analyst who asked not to be named said the best way for Capital A to raise funds were either from private investors or loans from foreign banks.

"Capital A can ask investors to inject capital into its subsidiaries instead of the holding company to lessen their risk exposure. But the group will  need to convince the investors on the potential return on investment in the event that its airline subsidiary, AirAsia, successfully goes through the downturn.

"Trust in the aviation sector is low now compared to pre-pandemic but with the reopening of Malaysia's borders soon, things look good because of the pent-up demand for travelling especially in Southeast Asia," the analyst said, adding that Capital A could also raise funds through loans from foreign banks.

Last week, Malaysia announced the reopening of its borders to international travellers from April 1 this year as well as relaxed travel rules including no quarantine for Malaysian and foreign travellers who are fully vaccinated upon arrival.

The analyst also said that Capital A and Danajamin could discuss about the financing scheme again to see the best requirements for the group to obtain the RM500 million funding.

"Of course, they (Capital A) need to showcase the importance of the airline industry to the country as well as AirAsia's contribution to the sector in the years before the pandemic. There should be a way for them to resolve this," the analyst said.

In terms of Capital A's Practice Note 17 status on Bursa Malaysia, the group has another nine months to restructure, the analyst said.

Capital A chief executive officer Tan Sri Tony Fernandes announced last week that the group would not proceed with the RM500 million loan under the Danajamin Prihatin Guarantee Scheme as it deemed some of the conditions imposed unreasonable.

Part of the conditions included the founders of Capital A, Fernandes and Datuk Kamarudin Meranun to be guarantors for the loan.

Both of them control about 24.64 per cent stake in Capital A via Tune Air Sdn Bhd (12.41 per cent) and Tune Live Sdn Bhd (12.23 per cent).

In a filing to Bursa Malaysia last week, the group announced that it was "exploring other available debt financing alternatives with acceptable terms suitable to the operations and financing requirements of the company."

https://www.nst.com.my/business/2022/03/780102/3-options-capital-get-funding