KUALA LUMPUR (Oct 5): AirAsia Group Bhd said it has secured the approval of Danajamin Nasional Bhd for a club facility of up to RM500 million under the Danajamin Prihatin Guarantee Scheme, which is part of the government's economic stimulus package following the pandemic outbreak.
In a statement Tuesday, the low-cost carrier said the loan has been approved by its lenders under a club deal term financing. Danajamin, via Syarikat Jaminan Pembiayaan Perniagaan (SJPP) — a wholly-owned entity of the Ministry of Finance — will guarantee 80% of the loan. In a club deal, a group (syndicate) of banks underwrites the full amount of a loan at the outset of the transaction.
In an interview with The Edge earlier this year, AirAsia co-founder and group CEO Tan Sri Tony Fernandes said the group’s funding plans included loans from three local banks, pending approval from Danajamin. He said the group was expecting to raise fresh funds of between RM2 billion and RM2.5 billion through debt, rights issue, and the monetisation of its digital assets, with the expectation that Danajamin would approve guarantee for RM1 billion worth of funding.
In its statement, AirAsia said financing under the facility will be used for working capital, which will support staff costs and key operating expenses such as aircraft maintenance, as the airline prepares to ramp up its operations leading up to the reopening of interstate and international borders.
It added that the guarantee is a strong “signal of support” for the group, as it gears up to ensure it is in a robust position to serve the nation and play a key role in rebuilding the economy.
“This approval from the Malaysian government is a strong endorsement of AirAsia Group’s ability to recover fast and provides a welcome boost to our overall fundraising strategy as we prepare to return to the skies in all of our key markets,” said AirAsia executive chairman Datuk Kamarudin Meranun.
He added that countries around the world have begun to reopen international borders as vaccination rates progress, highlighting that Malaysia’s adult vaccination rate is close to 90% now, and that domestic interstate movements will be allowed once the milestone is reached.
“The Langkawi travel bubble has been a huge success with overwhelming demand since we launched up to 90 services a week from Sept 16.
“In Thailand, Indonesia and the Philippines, we are seeing pleasing progress as services have gradually started to resume. As countries in the region continue to discuss and implement travel bubbles and to gradually reopen international borders, we are confident that we will be able to recover and rebound strongly in the near future,” Kamarudin said.
In a Sept 9 note, CGS-CIMB Research had expected AirAsia’s cash balances to be topped up by (1) RM240 million proceeds in August from the disposal of its 10.94% stake in FLY Leasing, (2) about RM252 million convertible debt issue by AirAsia's e-wallet unit BigPay to South Korea's SK Group in August, (3) RM975 million redeemable convertible unsecured Islamic debt securities issue by AirAsia by end-2021, and (4) RM1 billion new domestic bank loans, also hopefully by end-2021.
The carrier’s cash balance fell from RM533 million at end-2020 to RM448 million at end-March 2021, and down further to RM236 million at end-June 2021.
AirAsia shares fell one sen or 0.9% to close at RM1.12 apiece on Tuesday, giving the group a market capitalisation of RM4.37 billion.