Malaysia Airlines seeks UK court to complete debt restructuring by 1Q

Malaysia Airlines seeks UK court to complete debt restructuring by 1Q
-A +A

KUALA LUMPUR (Jan 6): Malaysia Aviation Group Bhd (MAG), the parent of loss-making national carrier Malaysia Airlines Bhd, is exploring the use of a UK scheme of arrangement to complete its current debt restructuring exercise by the first quarter of 2021. This is pending confirmation from the remaining small minority creditors, it said.

In a statement today, MAG said it is currently at the tail end of its restructuring exercise.

“Good progress has been achieved with full support by a large majority of its creditors for a consensual agreement.

“MAG is confident that it will achieve a win-win situation with all creditors involved and looks forward to execute its revised long-term business plan alongside its partners,” it added.

Last month, Deputy Finance Minister I Datuk Abd Rahim Bakri said as of Aug 31, 2020, the liquidity position of the MAG group of companies stood at RM366 million, apart from the RM578 million available from funds allocated by MAG's sole shareholder Khazanah Nasional Bhd.

MAG is in the midst of negotiations with about 40 creditors, lessors and key suppliers to accept a haircut on their outstanding debt as part of a RM16 billion debt restructuring plan. It had warned that unless it gets approval from creditors holding at least 75% of the total value of the debt — the threshold required by law — it could file for bankruptcy.

MAG is the holding company for Malaysia Airlines and other subsidiaries such as FlyFirefly Sdn Bhd, MASwings Sdn Bhd, MAB Engineering Sdn Bhd and MAB Kargo Sdn Bhd.

MAG group chief executive officer (CEO) Captain Izham Ismail, who also serves as group CEO of Malaysia Airlines, had told The Edge in an Oct 12, 2020 interview that once the airline has garnered enough support for its debt restructuring plan, it will file the plan with the UK court for court sanction. Following that, Khazanah will inject new capital into the airline to tide it over until the expected full recovery in the domestic and Asean air travel markets in 2022.

However, if the lessors and creditors decide against backing the restructuring plan, it will have no choice but to “execute Plan B”, which involves shutting the airline down and operating under sister airline Firefly’s Air Operator’s Certificate to ensure the business continuity of the national carrier.