Regional Express administrator EY is expected to work with investment bank Houlihan Lokey to run a sale process for the embattled airline, Street Talk can reveal.
It comes after Rex’s private equity backer, PAG Asia Capital, funded new money to the administrator on Wednesday to allow the regional flights division of Rex to go into administration, according to sources with direct knowledge of the situation.
PAG has put new capital into Regional Express. Not-For-SyndicationEY is working with law firm White & Case, the sources said. The advisers are understood to be preparing the entire company – barring the
already closed capital cities divisions – for a sale.
It remains to be seen what deal structure, and at what terms, PAG will push for at Rex. The Pan-Asian private equity firm is sitting on $150 million worth of convertible notes debt. It is unclear how much more PAG has now coughed up for Rex, although sources noted it is sufficient to keep regional customers in the air.
PAG, led by Hong Kong partner Lincoln Pan, is understood to have pushed for Rex’s board to spare units that are standalone profitable, such as the fly in, fly out contractor division, from the administration proceedings.
In January 2021, PAG invested $150 million in Rex to help it launch major city jet operations. Under the deal, the notes had an initial term of five years, and entitled PAG to earn 4 per cent per annum in interest and convert into equity at $1.50 a share. Rex shares last changed hands at 56¢ apiece, before it entered a trading halt on Monday.
At December 31, Rex had used up $120 million in total from the PAG convertible notes, which are first-ranking senior secured debt. Westpac has also provided a $175 million debt facility to Rex, of which the carrier had used $169.9 million at end of 2023.
The two lenders have security over different pools of assets.