Malaysia Airlines defers payments to bond holders by six months

Malaysia Airlines defers payments to bond holders by six months
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KUALA LUMPUR (Sept 22): Cash-strapped Malaysia Airlines Bhd has postponed its upcoming bond payments as the national carrier grapples with the economic impact of the COVID-19 crisis.

CIMB Investment Bank Bhd said holders of Malaysia Airlines' RM1.5 billion nominal value unrated Perpetual Sukuk Musharakah will have repayment on the bonds deferred by six months.

Issued in 2016, the next periodic distribution date was due on Sept 30.

According to CIMB Investment Bank, via an announcement put up on Bank Negara Malaysia (BNM)’s Fully Automated System for Issuing and or Tendering (FAST) site, the carrier has issued notices of deferral dated Sept 17 to the holders of its Islamic bond.

"Pursuant thereto, please be informed that there will be no payment of periodic distribution amounts to the sukuk holders on the periodic distribution date in respect of the following periodic distribution periods: (1) from March 29, 2019 to Sept 30, 2019; (2) from Sept 30, 2019 to March 31, 2020; (3) from March 31, 2020 to Sept 30, 2020.

"Accordingly, the periodic distribution date will be deferred to the next periodic distribution date i.e. March 31, 2021," the announcement read.

The airline issued the sukuk to raise funds for working capital and general investment, among others.

Malaysia Airlines has remained loss-making even after an RM6 billion bailout and privatisation exercise by its sole shareholder, sovereign wealth fund Khazanah Nasional Bhd, in 2014, as overcapacity, higher fuel costs and a depreciating ringgit kept yields from rising. The situation has been worsened by the COVID-19 pandemic, which brought the travel industry to a standstill.

Malaysia Airlines narrowed its net loss by 2.5% year-on-year to RM791.71 million in the financial year ended Dec 31, 2018 as revenue improved by a slight 0.8% y-o-y to RM8.74 billion.

In June, Malaysia Airlines said it is realigning its long-term business plan (LTBP1) — which was revealed in July 2019 — to the changing aviation landscape.

The LTBP1 replaces the 12-point MAS Recovery Plan, which was announced in 2014 and ended last year. The LTBP1 would have seen the national carrier achieve financial break-even by 2022 and generate enough income to cover the cost of capital for its operations two years after that.

On July 28, Malaysia Airlines said it has not received any funding from the Government. It added that Khazanah had been supportive of its efforts to address and cope with the impact of the COVID-19 crisis, but had not committed any additional funding to the carrier.

At the time, it was responding to a report by The Edge weekly, quoting sources, that it had secured US$300 million worth of new funding to help see it through the pandemic crisis.

Tan Choe Choe