MAS to raise over RM4b from bonds, loans
UPDATED @ 12:18:53 AM 23-05-2012
KUALA LUMPUR, May 22 – Malaysia Airlines (MAS) unveiled details of its critical fund raising exercise today consisting of RM2.5 billion in Islamic bonds, RM2 billion in bridging loans from commercial banks and proposals for a new state entity to pay for RM5.3 billion of pending aircraft delivery and lease them to MAS rather than own the planes outright.
MAS said that should its plans fall short, it would fall back on its parent company, state asset manager Khazanah Nasional to step in to provide financial support in the form of an equity capital injection to finance any unfunded aircraft capex (capital expenditure) and also for working capital needs.
“Such financing would only be forthcoming if and when required and subject to targets to be agreed,” said MAS in a statement.
The airline, which posted its largest ever annual loss of RM2.5 billion in February, proposed to launch a 10-year sukuk programme of up to RM2.5 billion to shore up its capital base, and the proposed programme is currently pending regulatory approvals.
It also said that it secured a bridging loan of RM1 billion from a local commercial bank on 30 March to ensure adequate working capital cash until the expected drawdown of the first tranche of the proposed sukuk.
MAS also said that it is in discussions with the Ministry of Finance Inc (MoF) to lease six new Airbus A380s and two new Airbus A330s with a total capital value of RM5.3 billion from a special purpose vehicle (SPV), which would be wholly-owned by MoF Inc.
The SPV would issue bonds or Sukuk in the ringgit capital markets and be asset-backed or collateralized by the aircraft assets which it is financing and the operating cash flows generated from the assets are expected to repay the lease obligations over the tenure of the funding.
MAS would enter into a long-term obligation to lease the aircraft from the SPV and the operating risks and residual value risks of the aircraft assets would be borne by by the national carrier.
Five of the aircraft would be delivered in 2012, where the first two aircraft are to be delivered by end May and another three are to be delivered in the second half of 2012. The remaining three aircraft would be delivered in early 2013.
The carrier also secured a bridging loan of RM1 billion from a consortium of local banks to pay for the two aircraft due in May.
The capital expenditure (capex) bridging loan would be repaid by aircraft proceeds from the proposed funding SPV, which MAS said would hopefully take off in July.
MAS said that it is “confident” of raising the requisite funding for the remaining capex of 2012 from commercial sources, such as operating leases, finance leases and commercial debt.
It said that it received funding commitments and proposals from “numerous” third party financiers for the remaining aircraft capex obligations in 2012, and also for some capex obligation in 2013.
MAS reported losses of RM171 million after tax for its first quarter ending March 31, down 29 per cent reduction from the same period last year.
Operating losses were also trimmed by 10 per cent to RM307 million due to increased revenue of RM3.11 billion and reduced expenses of RM3.42 billion.
Its chief executive Ahmad Jauhari Yahya said this was due to “some tough decisions” in accordance with its turnaround plan.