Debt and corporate restructuring needed to avoid liquidating
Restructuring needed to raise fresh capital to restart airline
Shareholders' equity in deficit, current liabilities exceed current assets
Board member appointed to lead restructuring
Updates with more details
KUALA LUMPUR, Oct 6 (Reuters) - The long-haul arm of Malaysia's flagship budget airline, AirAsia X Bhd (AAX) AIRX.KL, has proposed restructuring its debt and reducing its issued share capital to avoid liquidation and pave way for fresh capital, it said in a late bourse filing on Tuesday.
AAX said in a separate statement it is facing severe liquidity constraints to meet debt and other financial commitments and with no return to normalcy in sight, "an imminent default of contractual commitments will precipitate a potential liquidation of the airline."
A major debt restructuring and a renegotiation of its financial obligations, as well as revised level of operations, are pre-requisites for any raising of fresh equity and debt which will be required to restart the airline, it said.
The group is seeking to restructure approximately 63.5 billion ringgit ($15.30 billion) of debt and for any balance to be waived, the subsidiary of AirAsia Group Bhd said.
AAX said unaudited records as at June 30 show it had a deficit in shareholders' equity of 960 million ringgit, and its current liabilities of 3.38 billion ringgit exceeded current assets of 1.39 billion ringgit.
The group, hard hit by the coronavirus pandemic as closed borders kept most of its planes grounded for months, also proposed reducing its issued share capital by 90% and consolidating every 10 existing ordinary shares into one share.
It has appointed board member Lee Kian Onn, a chartered accountant and former banker, as deputy chairman to lead the restructuring.
AAX's restructuring plan comes despite efforts taken to control costs, including grounding all scheduled flights, salary cuts and retrenchment across the group.
"To avoid a liquidation and to allow the airline to fly again, the only option is for AAX to undertake a group-wide debt and corporate restructuring and update its business model to survive and thrive in the long term," it added.
AAX's revised business plan involves route network rationalisation, aircraft fleet right-sizing, cost base overhaul and workforce optimisation to ensure a leaner and more sustainable business.
($1 = 4.1510 ringgit)
(Reporting by Liz Lee; Editing by Kirsten Donovan and Louise Heavens)
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