Malaysian long-haul budget airline AirAsia X Bhd (AAX) has proposed a separate restructuring programme for its aircraft lessors that aims to tackle their concerns, citing a chance to recover rental losses, a document seen by Reuters shows.
The airline, which is an affiliate of AirAsia Group, has been trying for months to reconstitute 64.15 billion ringgit ($15.9 billion) of debt into 200 million ringgit of debt. More than a dozen creditors, mostly lessors, had intervened in court to challenge a proposal that would have meant a haircut for them of 99.7%.
The new proposal for lessors is a key step as the airline looks to win creditors' approval for its restructuring.
The proposal seeks to address lessors' concerns about their forward commercial agreements and the viability of the airline's business after recapitalisation, according to the document, which comprises slides describing the plan.
Under the revised proposal, AAX said that lessors are expected to recover at least 60% of what they are owed.
A person familiar with the matter said that the airline deemed the earlier description of the debt haircut inaccurate as they "excluded returns from ongoing leases", referring to recovery of rental losses and outstanding debt.
AAX urged lessors to agree to a "pre-packaged lock-up" deal to expedite the restructuring process.
The person, who declined to be named because of the sensitivity of the matter, said that the airline wants to lock in terms of the deal with lessors before convening a creditors meeting to vote on the restructuring.
"[It] balances the needs of creditors and new investors without compromising the financial viability of the business plan," AAX said in the slides.
AAX did not immediately respond to a request from Reuters seeking confirmation of the proposal.
Lessors ICBC Leasing, Kayan Aviation, Aviator Capital, Castlelake, Aircastle and Minsheng Financial Leasing did not immediately respond to Reuters' requests for comment. Macquarie AirFinance, BOC Aviation Ltd and AerCap declined to comment.
The revised restructuring plan comes as the Kuala Lumpur High Court allowed AAX to convene creditor meetings and vote on its restructuring plan, The Edge Financial Daily reported.
The Edge also reported that the court has separated the airline's creditors into three categories: airport operator Malaysia Airports Holdings Bhd, planemaker Airbus SE and other creditors. The aircraft lessors, for whom AAX has proposed the new plan, will fall into the last category.
The split could give lessors a bigger say in the talks, as Airbus otherwise accounts for most of the debt AAX wants to restructure.
The court has also ordered AAX to convene separate meetings with its different groups of creditors within six months.
"Lessors have no choice but to go through [with this plan] if they want to recoup their money, however paltry it is," head of aviation consultancy Endau Analytics Shukor Yusof said, adding that AAX's business model needs to be fundamentally reassessed.
Last year, BOC Aviation asked the court to dismiss AAX's restructuring proposal as it ruled out a debt-to-equity swap and gave too much power to Airbus as a creditor. It also said that AAX was "hopelessly insolvent." In December, the airline announced plans to raise 500 million ringgit through a rights issue to existing shareholders and a share subscription for new investors after its debt restructuring.
AirAsia Group Expects Fundraising Clarity Next Month
Separately, AirAsia Group Bhd's chief executive officer, Tony Fenandes, said that the group expects more clarity on its fundraising efforts, including a government-guaranteed loan, by the end of March.
Fernandes said that the airline is working towards obtaining approval for the loan under a government-guarantee scheme within the next month.
"Concurrently, we have positive ongoing discussions for other fundraising support measures in many of our key markets such as Thailand, Indonesia and the Philippines," he said in a statement.
The airline has a target to raise 2.5 billion ringgit ($618.51 million) from loans and investors.
Fernandes said that the airline can look to a gradual recovery this year in its key markets and "potentially a full recovery within the next two years".
AirAsia has raised 250 million ringgit from the first tranche of a recent private placement of up to 20% of its total issued shares, that was completed last week.
The entire placement exercise was expected to raise about 454.5 million ringgit.
Last October, the airline said that it secured and disbursed a 300 million ringgit loan from Sabah Development Bank Bhd.
Fernandes said that other capital raising and financial support measures were also being considered, including for its digital businesses.
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