Saturday 30 Mar 2024
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KUALA LUMPUR (Mar 1): AirAsia Bhd is divesting its aircraft leasing business, currently managed by its wholly-owned subsidiary Asia Aviation Capital Ltd (AACL), to entities managed by BBAM Ltd Partnership for US$1.185 billion (RM4.62 billion), on the back of an enterprise value of US$2.85 bilion (RM11.1 billion).

AirAsia said BBAM is the world's third largest commercial aircraft manager with 400 aircraft under its management.

In a filing with Bursa Malaysia today, AirAsia said AACL has entered into three agreements to dispose 84 aircraft and 14 aircraft engines to units managed by BBAM, and leaseback 79 aircraft and 14 aircraft engines.

These units under BBAM includes FLY Leasing Ltd, Incline B Aviation Ltd Partnership and Herondell Ltd.

All the purchasers are involve in acquisition, leasing and disposition of commercial jet aircraft and engines, and FLY is listed on the New York Stock Exchange.

Apart from existing aircraft, AirAsia and AACL also entered into agreements with the same parties to dispose up 98 aircraft to be delivered in future.

The disposal consideration will be settled in US$1.085 billion (RM4.23 billion) cash, US$50 million (RM194.9 million) investment in-kind to BBAM’s managed units, namely Incline A Aviation Ltd Partnership and Incline B Aviation Parallel Ltd Partnership, and US$50 million or US$15 per share in subscription of 3.33 million shares or 10.2% stake in another BBAM’s manage unit FLY Leasing Ltd.

AirAsia said as a result of the disposal, the group is expected to recognise a gain on sale of approximately RM967.1 million.

AirAsia said the disposals could raise a gross proceeds of US$901.8 million (RM3.52 billion), of which RM788.1 million or 22.4% of total to be utilised for prepayment of bank borrowings; RM112 million or 3.2% for expenses on the proposed disposal; while the remaining RM2.62 billion or 74.4% to be determined later.

“The board has decided that a portion of the remaining proceeds shall be distributed as special dividends with the quantum to be determined upon the receipt of the proceeds from the proposed disposals,” AirAsia said of the remaining proceeds.

“Further, the board is to decide later on the specific allocation of the remaining proceeds as the management is currently evaluating options for the optimal utilisation of the remaining proceeds to strengthen AirAsia’s financial performance and maximise its shareholders’ value,” it added.

AirAsia said the proposed disposals are in line with its strategy to focus on core airline operations, reduce financial leverage, and establish partnerships with BBAM.

The group’s gearing ratio as at financial year end Dec 31, 2016 stood at 1.6 times, and would reduce to 0.43 times after all the disposals.

AirAsia expect to complete the disposal by third quarter of this year.

In a statement today, AirAsia Group chief executive officer Tan Sri Tony Fernandes described the disposals as the ‘perfect’ outcome to the group’s strategy in divesting non-core assets.

“Today’s sale is much in line with our stated strategy of disposing non-core assets and businesses, an undertaking which we have successfully executed over the last six months – starting with our training centre, ground handling unit and now our leasing unit – and unveiling the true value of AirAsia. When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets,” he said.

“This deal shows it was the right strategy as we have something of value to dispose in return for cash and an equity relationship in two great companies, while removing residual risks. This is a perfect outcome to a strategy we started in 2004 and I’m thrilled at the execution of our longterm vision. We have now disposed of most of our physical non-core assets and we are thrilled to be embarking on our new digital strategy which will build a very valuable group of assets,” he added.

Credit Suisse, BNP Paribas and RHB Investment Bank Bhd are acting as joint financial advisors, and Milbank, Tweed, Hadley & McCloy LLP and Zaid Ibrahim & Co are acting as counsels to AirAsia Berhad.

AirAsia’s shares were suspended from trading in the morning session today and will resume trading by 2:30pm later.

The counter fell eight sen or 1.79% to close at RM4.38 yesterday, giving it a market capitalisation of RM14.64 billion.

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