Australia’s Rex in talks re A$150mn investment for growth

Rex – Regional Express (ZL, Wagga Wagga) says it has signed a long-form term sheet and is in advanced exclusive negotiations with PAG Asia Capital over a AUD150 million Australian dollar (USD107.7 million) investment for the expansion of its domestic operations in 2021. “The funding is proposed to comprise first ranking senior secured convertible notes. It is proposed that an initial funding tranche of AUD50 million (USD36.6 million) will be drawn on completion of the transaction, targeted for the end of December 2020, with the balance of the funding drawn over the following three years,” the Australian carrier explained in a statement. The notes will be convertible at a price of AUD1.50 (USD1.10) per share, at an over 30% premium compared to the closing price of parent Rex Express Holding Limited at the Australian Securities Exchange on September 22, which stood at AUD1.14 (USD0.83) per share. The conversion of the first AUD50 million tranche would give PAG a 23% stake in the carrier, while the conversion of the entire AUD150 million will give it 48%. The new investor will nominate two directors to the Rex board upon the completion of the transaction. The deal remains subject to customary conditions, including due diligence by the investor, the approval of Rex’s existing shareholders, and Australia’s Foreign Investment Review Board (FIRB). Rex is planning to use the fresh capital to fund its expansion into the narrowbody segment potentially using B737-800s. It hopes to start mainline operations on trunk domestic routes between Brisbane Int’l, Sydney Kingsford Smith, and Melbourne Tullamarine in March 2021. PAG Asia Capital manages around USD40 billion in capital but has no airlines in its portfolio.