Malaysia’s AirAsia X suggests paying 0.5% of $8.1bn debt

AirAsia X (D7, Kuala Lumpur Int’l) has asked its creditors to convene on November 12 to consider a restructuring proposal in which the long-haul low-cost carrier would pay only 0.5% of the debt owed to each of them and terminate all existing contracts before an eventual resumption of operations.

Having gained more time to organise the meetings, the airline disclosed in a Bursa Malaysia filing on October 18 that three virtual gatherings would take place on November 12 for its 15 supplier and lessor creditors “for the purpose of considering and if thought fit, to approve, with or without modifications the proposed debt restructuring on the terms as detailed in the explanatory statement of AAX dated 18 October.” These 15 creditors are:

BOC Aviation;
Malaysia Airports;
Macquarie AirFinance;
Sky High Leasing;
ILFC;
KDAC Aircraft Holding 4;
Jerdons Baza Leasing 1048 Designated Activity;
Jerdons Baza Leasing 1066 Designated Activity;
Jerdons Baza Leasing 1075 Designated Activity;
Lavender Leasing One;
Lavender Leasing Two;
BNP Paribas Singapore;
AWAS 1533;
AWAS 1549; and
Airbus.
In the explanatory statement, numbering 127 pages, the AirAsia Group affiliate proposes a restructuring of MYR33.65 billion ringgit (USD8.07 billion) worth of liabilities. “To avoid a liquidation and to allow the airline to fly again, the only option is for AAX to undertake the proposed debt restructuring,” the airline empasised in the document, as seen by Reuters.

Half of the total sum of liabilities is the cost of terminating aircraft orders from its biggest creditor, Airbus, for seventy-eight A330neo widebodies and thirty A321neo narrowbodies, the document said. According to the ch-aviation fleets advanced module, these are seventy-eight A330-900Ns and thirty A321-200NX(XLR)s. Its current fleet of twenty-two A330-300s, just three of which are owned and the rest leased from ten lessors, remains largely grounded.

The carrier additionally pledged that if it manages to achieve above MYR300 million (USD71.9 million) in annual earnings during its 2023-2026 financial years (before interest, tax, depreciation, and amortisation (EBITDA) and leasing and restructuring costs), then all creditors – except Airbus – would be entitled to 20% of those earnings.

The 0.5% of debt owed to each of the creditors would be paid out of operating revenue one year after the debt restructuring is agreed, the explanatory statement said.

Reuters reported one month ago that sources had claimed Airbus had agreed to reschedule delivery or cut prices for hundreds of aircraft that AirAsia Group airlines had ordered, a restructuring reset that reestablishes relations between the two companies.

AirAsia X remains in talks with lessors and other creditors on the commercial terms for continued or future business relationships, according to the explanatory statement. To lessors, it has offered that they continue to lease aircraft to it on new terms or accept the termination of the lease. Two lessors have indicated they want to end the leases, the document said.

On November 12, AirAsia X will need agreement from creditors holding at least 75% of the total debt value in each of three classes of creditors – one class per meeting on the day – to win overall approval for its restructuring proposal. The three classes are for suppliers, lessors, and thirdly Airbus, the largest creditor of all in terms of value. The carrier has claimed that several creditors have indicated they are in favour of the proposal. Airbus has declined to comment on the process.

After the debt restructuring, AirAsia X – of which AirAsia Group and its founders own around 43% – intends to raise MYR500 million (USD120 million) through a rights issue and share subscription.