Australian regional airline Rex nears deal to fund big-city flights
SYDNEY, Sept 22 (Reuters) - Australian airline Regional Express Holdings Ltd (Rex) REX.AX said on Tuesday it was in advanced talks with Asian investment firm PAG Asia Capital for up to A$150 million ($108.4 million) of funding to launch jet services between major cities.
The flights would compete against those offered by the country's dominant airlines, Qantas Airways Ltd QAN.AX and Virgin Australia Holdings Ltd VAH.AX, from March 1, 2021 at a time when they are struggling financially due to the pandemic.
It would be a major expansion for Rex, which currently operates on less competitive regional routes like Sydney to Wagga Wagga and Adelaide to Port Lincoln using a fleet of ageing Saab 340 turboprops with 30 to 36 seats.
Rex said it had signed a long-form term sheet with PAG and planned to draw on an initial A$50 million convertible note tranche by the end of this year, with the balance drawn over three years.
The notes would be convertible at A$1.50 a share, which compares with Rex's last closing price of A$1.09. It would give PAG a 23% stake in the airline upon the exercise of the first tranche and 48% if the full amount was drawn and converted.
PAG, which manages $35 billion in capital for institutional investors according to its website, would also be entitled to nominate two Rex board directors.
Rex Executive Chairman Lim Kim Hai said in a statement that the airline would provide domestic flights that were safe, reliable and affordable.
PAG did not respond immediately to a request for comment.
($1 = 1.3833 Australian dollars)
(Reporting by Jamie Freed; Editing by Stephen Coates)
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