KUALA LUMPUR (Feb 22): Khazanah Nasional Bhd, the sole shareholder of Malaysia Airlines Bhd, has committed to inject RM3.6 billion in new capital into the national carrier's holding company Malaysia Aviation Group Bhd (MAG), to fund the group's business until 2025.
Last November, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz was quoted as saying that a total of RM28 billion had been injected into Malaysia Airlines by Khazanah to date.
The latest commitment follows Malaysia Airlines’ RM16 billion debt restructuring plan that was given the green light by the UK High Court today, with the deal set to complete by early next month.
In a statement this evening, MAG said the UK High Court has sanctioned a scheme of arrangement under Part 26 of the UK Companies Act 2006 between MAG’s leasing entity MAB Leasing Ltd and the majority of MAG’s aircraft operating lessors today.
"The scheme received the unanimous support of the relevant lessors and represents an important component of MAG’s wider restructuring exercise, which will achieve a reduction in MAG’s liabilities of over RM15 billion.
"This financial restructuring exercise, which is expected to complete in early March, involves all of MAG’s key stakeholders and, in addition to the scheme, will see the airline successfully achieve bilateral agreements with finance lessors, spare engine lessors, maintenance service providers, corporate lenders and government-related entities," it said.
"Now that the scheme has been formally sanctioned by the UK court, the airline can proceed to implement its restructuring plan with the support of Khazanah and existing stakeholders," it added.
Key elements of the restructuring so far include network cuts, structural cost savings, cash conservation and payment deferral initiatives, which translated to RM5.5 billion in savings in 2020. It is aiming for another RM397 million in savings for the first quarter of 2021.
Meanwhile, operating lessors supported the airline with a reset of lease rates to market and deferrals, while deferrals will also be implemented with finance and other lessors.
A term-out of facilities was also agreed to by revolving credit facility (RCF) lenders and hedging counterparties, while government-related entities have agreed to various concessions to enable a solvent recapitalisation of Malaysia Airlines.
"The conclusion of the legal process together with the holistic reset of the operating platform and balance sheet have paved the way for a more agile and lean future for the carrier, giving MAG room and ability to fulfil its enhanced Long-term Business Plan (LTBP 2.0) and achieving its Vision 2025," MAG group CEO Captain Izham Ismail said.
“The longer-term vision of MAG is to establish itself as a leading global travel group. This signifies a paradigm shift in the way we prioritise the different business segments and subsidiaries in the group’s portfolio.
"We seek to expand MAG’s involvement into other travel-related products and services beyond flights, which will go a long way in helping our customers complete their end-to-end travel experience. Our geographical advantage, award-winning solutions and services, plus signature Malaysian Hospitality will also help us in diversifying our revenue stream by minimising the need for us to rely on the heavily competitive air travel industry for survival,” he added.
MAG says it will be engaging with policy makers in ensuring a positive return on investment for all aviation industry players.