Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on May 10, 2016.

 

SEPANG: Minority shareholders of AirAsia Bhd yesterday approved a RM1.01 billion private share placement to its founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun that will raise their effective stakes from their existing 18.9% to 32.4% respectively, just slightly below the mandatory general offer threshold of 33%.

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The budget carrier said it will use proceeds from the placement exercise to pare off debt. The group’s net debt amounted to RM10.2 billion, with net gearing of 2.29 times as at Dec 31, 2015.

“We are doing this (private placement) because we want to show our commitment to AirAsia. It is very pleasing to receive overwhelming support from shareholders,” Fernandes told a press conference after its extraordinary general meeting yesterday.

“Some people have asked us if we are retiring, are we going to leave, etc. The best way to show our commitment is to show it by financial reasons as well, put our money where our mouth is,” he said.

Fernandes said the duo have a “mission unaccomplished” and will only retire after achieving it. “I think the point is who doesn’t want to take it easy? But we are enjoying what we’re doing now.”

In April, AirAsia entered into a conditional subscription agreement with Tune Live Sdn Bhd, a company jointly owned by Fernandes and Kamarudin, for the proposed issuance and allotment of 559 million new AirAsia shares (16.7% of enlarged shares) to Tune Live at RM1.84 per share.

The proposed deal has raised concerns over its dilutive effect on AirAsia’s earnings per share, as well as why the duo are agreeing to pump in RM1 billion now and pay RM1.84 a share when during the height of the crisis, the airline’s share price fell to as low as 78 sen.

Kamarudin reiterated that both he and Fernandes have no plans to hand over the reins of AirAsia to others anytime soon.

“We will eventually retire, but I don’t foresee it for the next couple of years,” he said.

“The fact that we are committing RM1 billion shows that we will be here for quite a while,” he added.

To recap, Tune Live, which is currently dormant, is equally owned by Fernandes and Kamarudin. Upon completion of the proposed shares issuance, Tune Live will hold 15.7% of the enlarged issued capital of AirAsia.

AirAsia has said that 34% of the proceeds raised will be used to prepay its unsecured term loan facilities and repay its unsecured revolving credit, which will lower its gearing to 2.22 times.

About 27% of the capital raised will be spent on funding aircraft, spare engines and other aircraft parts, another 28% on general corporate and working capital, while 10.3% of the funds will be used to partially fund the construction of its new headquarters at klia2, which is scheduled to be completed this year.

Meanwhile, Fernandes said AirAsia’s stock is “really undervalued” after it was impacted by Hong Kong-based research GMT Research’s report in June last year, which questioned the airline’s accounting practices, accusing it of using transactions with associate companies to boost its earnings.

Fernandes also said AirAsia is looking at plans to consolidate the operations of its subsidiaries in the region, although the plan is still in a preliminary stage.

“I’ve been meeting various governments in Asean to talk about creating Asean brands and Asean common ownership, so I’ve been pushing the proposal of maybe creating [an] Asean airline.

“It has always been my dream but we have to deal with 10 different governments. The response so far has been very good, but it is early, early days,” he said, adding he has received “tremendous support” from Thailand.

Bernama on April 30 reported that Fernandes is planning the consolidation of AirAsia’s subsidiaries in the region and listing of the consolidated company on the Stock Exchange of Thailand or seeking a dual listing in Malaysia and Thailand.

The report, quoting Thai Deputy Prime Minister Somkid Jatusripitak, said AirAsia is also mulling the possibility of setting up its international headquarters in Thailand, as well as building its own airport in the country.

Fernandes said as the air travel market stabilises in the region, the airline is considering to increase its capacity.

“We have been very aggressive in terms of cutting down capacity, which I think is the right thing to do, but now things have stabilised around the region.

“It is something we will look at but it is premature at the moment,” he added.

AirAsia shares closed eight sen or 3.96% higher at RM2.10 yesterday, with a market capitalisation of RM5.84 billion.

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