KUALA LUMPUR (March 10): Capital A Bhd (formerly known as AirAsia Group Bhd) was unable to obtain the RM500 million club facility under Danajamin Nasional Bhd’s Prihatin Guarantee Scheme as the company was not agreeable to a condition that its founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun be guarantors for the loan.
On top of that, the low cost carrier, which is in midst of its recapitalisation exercise, was not able to meet Danajamin’s requirement for it to submit a regularisation plan and obtain approval from Bursa Malaysia Securities Bhd to remedy its negative shareholder equity to be above RM40 million and 25% of its share capital or obtain a time extension to provide the regularisation plan from the exchange for the same tenure as the Danajamin club facility.
The latest development raises uncertainty on the airline's recapitalisation exercise as the loan from Danajamin forms a substantial part of the fundraising plan.
In a filing to Bursa Malaysia, Capital A’s board of directors and management announced that the company would not be proceeding with the club facility as it is “unable to accept and/or fulfil certain conditions” set by Danajamin.
The filing stated that a joint and several guarantees were required as security to Danajamin from Fernandes and Kamarudin, both of whom control about a 24.64% stake in Capital A via Tune Air Sdn Bhd 12.41% and Tune Live Sdn Bhd 12.23%.
“Capital A is exploring other available debt financing alternatives with acceptable terms suitable to the operations and financing requirements of the company,” said the company in the filing.
To recap, Capital A had on Oct 5, 2021 announced that it had received the approval from Danajamin for an 80% guaranteed loan of up to RM500 million under the Danajamin Prihatin Guarantee Scheme.
The RM500 million Danajamin-guaranteed loan was part of Capital A’s RM2.5 billion fundraising exercise for recapitalisation after the carrier was hard hit by the Covid-19 pandemic, just like other airlines worldwide.
Capital A managed to raise RM336.46 million private placement of 470.21 million new shares in March plus RM974.5 million via its cash call by rights issues of 1.11 billion redeemable convertible unsecured Islamic debt securities (RCUIDS) in December. It also sold its 10.94% stake in New York-listed Fly Leasing after Carlyle Aviation Partners had acquired the aircraft lessor in August for US$56.83 million (RM239.98 million).
Meanwhile, the company was able to raise fresh capital to expand its non-aviation operations. South Korean conglomerate SK Group is providing up to US$100 million financing to BigPay, Capital A’s fintech company.
Capital A fell into a Practice Note 17 (PN17) status on Jan 13 this year after its application to secure extension for an 18-month relief period to beyond Jan 7, 2022 was rejected by Bursa Malaysia.
Capital A first triggered the PN17 criteria in July 2020 after its external auditors, Ernst & Young PLT had issued an unqualified audit opinion with material uncertainty relating to going concern in respect of its audited financial statements for the financial year ended Dec 31, 2019 (FY19) and its shareholders’ equity on a consolidated basis was 50% or less of its share capital.
The company had also triggered the prescribed criteria pursuant to Paragraph 8.04 and Paragraph 2.1(a) of PN17 of the Main Market Listing Requirements, as the company’s shareholders' equity on a consolidated basis had dipped below RM40 million and 25% of its share capital based on the audited financial statements for FY20.
Capital A’s shares were two sen or 3.13% higher to close at 66 sen on Thursday (March 10), and it is currently valued at RM2.75 billion based on 4.16 billion outstanding shares, based on Bloomberg data.
Year-to-date, the stock had declined by 15 sen or 18.5% from 81 sen.