Malaysia’s Capital A rejects $119mn loan due to terms
Capital A, formerly AirAsia Group, has opted not to go ahead with a syndicated loan of up to MYR500 million ringgit (USD119 million) under a guarantee scheme run by the state-owned financial institution Danajamin Nasional as it felt that some of the strings attached were unreasonable, group CEO Tony Fernandes has said.
The AirAsia (AK, Kuala Lumpur Int’l) parent had revealed in a Bursa Malaysia filing on March 10 that it would not be proceeding with the 80% state-guaranteed loan, which it had initially announced last October, “because it is unable to accept and/or fulfil certain conditions” set by the national financial guarantee insurer. It is now “exploring other available debt financing alternatives with acceptable terms,” it added.
One of the conditions of the club facility was that its co-founders – Fernandes and longtime business partner Kamarudin Meranun – be guarantors for the loan. The two hold a combined 24.64% stake in Capital A through entities Tune Air (12.41%) and Tune Live (12.23%).
A second condition the group objected to was that Danajamin Nasional had requested that it submit a “regularisation plan” for Bursa approval to remedy its negative shareholder equity, or obtain an extension to provide the plan for the same tenure as the syndicated loan.
Capital A had said in January that Bursa Malaysia had dismissed its application to extend a relief period that prevented it from being classified as a Practice Note 17 (PN17) company, a status that relates to companies that are in financial distress.
“We decided not to proceed with the club facility as we felt some of the conditions imposed were unreasonable. The required approvals from Bursa Malaysia were not within our control, and while we did seek a time extension to provide a regularisation plan, ultimately our application was declined,” Fernandes explained in a statement the following day.
“Kamarudin and myself remain committed to Capital A’s recovery having been actively involved in steering the group through this crisis day-in, day-out over the past two years,” he said, adding that to support the group’s turnaround plan they had personally injected MYR257.3 million (USD61.4 million) of the MYR974.5 million (USD232.6 million) rights issue that was completed on December 31.
“However, while we are willing to provide the personal guarantees requested on top of our previous cash support […], such a request for us to guarantee everyone’s exposure is unseemly for a public-listed company considering we are but two among many Capital A shareholders which also includes institutional investors.”
Fernandes insisted that Capital A’s fundraising strategy remains on track to sustain operations during 2022, aiming to “return to profitability and delivering value to our shareholders once again in the near future.”