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Malaysia’s AirAsia X Approved for Restructuring Process
Malaysian low-cost carrier AirAsia X has been earned shareholder approval to go ahead with the debt restructuring process, which will allow the airline to pursue a plan that is viewed as essential for survival through the ongoing pandemic crisis. This comes as seemingly better news in light of the recent seventh-consecutive quarter loss it had reported just a few weeks ago.
Shareholders of the long-haul subsidiary of the AirAsia Group had agreed upon a majority of the proposed solutions at a general meeting, having passed with a 99.8% margin, which included a rights issue and share subscriptions for potential new investors to raise at least 500 million ringgit ($121.2 million). The shareholders’ approval meant a major step forward in the airline’s restructuring process.
“These approvals have been obtained simultaneously with final negotiations being held with creditors,” AirAsia X said in a statement, adding that beyond advisers, it had also been “in active and productive” talks with lessors and others.
In October 2020, AirAsia X proposed a restructuring plan for the 64.15 billion ringgit debt it owed at the time into a principally structured amount of just 200 million ringgit and to have the remaining amount waived.
Then in February 2021, a Malaysian court granted the troubled airline leave to assemble separate meetings with its various groups of creditors within a timeline of six months to vote on proposed schemes. And in March, the court granted it an additional three-month order against any potential proceedings that creditors or lessors may file against the airline, which could hinder the restructuring process.
AirAsia X said that the next meeting with its creditors will be scheduled for late July or August.
Challenges from Creditors
Toulouse, France-based aircraft manufacturer Airbus had last year joined the more than a dozen creditors who wanted to challenge the airline’s debt restructuring proposal, stating that it would result in more than $5 billion worth of aircraft orders being lost should the proposal be approved.
Fortunately for AirAsia X, the challenge from Airbus did not seem to go through, although the same fate cannot be determined for another airline in a similar position – Czech Airlines — as Airbus is seeking financial compensation from the airline while it is still in the midst of its ongoing lengthy restructuring process.
Other challengers such as lessor BOC Aviation (BOCA) had also asked a Malaysian court to dismiss AirAsia X’s debt restructuring scheme, stating that it was unfair for proposing to write off more than 90% of claims without offering creditors any equity stake, said BOCA Chief Operating Officer David Walton last year.
Walton had further questioned the airline’s improper debt calculations, seeing as that a good majority of the amount was tied to aircraft orders from Airbus SE that have not been delivered.
“Aircraft purchase commitments cannot be considered as an accurate assessment of the accrued and crystallized debts,” Walton said in the affidavit supporting the lawsuit by BOCA. He also said then that BOCA should have been categorized differently from an equipment manufacturer like Airbus due to a conflict of interest, and that BOCA should be classified a financing creditor instead.
In light of this current news of an approved restructuring process, Airbus had said that it cannot comment on the airline’s ongoing restructuring process, whereas BOCA said that it does not participate in commenting on individual customers.
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