http://biz.thestar.com.my/news/story...7&sec=business
AirAsia planning RM150mil bonds
BY P.W. THONG
AIRASIA Sdn Bhd, Asia's only low-fare, no-frills airline, is in advanced negotiations with its merchant bankers on a RM150mil Islamic bond issue in three tranches. It could be rolled out as early as in September.
Its executive director, Kamarudin Meranun, said the company would decide next week, whether to issue the bonds on its own or through a structured deal with Exim Bank.
Irrespective of how the issue would be made, the company had been told the indicative rating for the bonds was “very favourable” – a rating of at least AA, Kamarudin said.
He added that AirAsia also planned to list on the KLSE main board in three to five years, most probably through an initial public offering (IPO) rather than a reverse takeover (RTO).
“We are not doing an RTO because we can get better value through other means of funding even without listing, such as placing out shares to new investors and issuing bonds,'' Kamarudin said, adding that the IPO would be used to fund the company's expansion programme in the longer term.
He was speaking to reporters in Putrajaya after AirAsia sealed an agreement yesterday to place out 26% of its shares to three investors – Bahrain-based IDB Infrastructure Fund LP, Saudi's Crescent Venture Partners, and Germany's Deucalion Capital II Ltd – for US$26mil (RM98.8mil).
Under the agreement, IDB would take up a 10% stake in AirAsia, Crescent Venture 9%, and Deucalion Capital 7%.
The share placement will involve a primary share issue of 21%, and 5% from the share sale of AirAsia's existing major stakeholder, Tune Air Sdn Bhd.
After the exercise, AirAsia's paid-up share capital will increase to RM100mil, from RM55mil; and Tune Air's stake in AirAsia will drop to 73.41%, from 99.25%.
AirAsia chief executive officer Tony Fernandes said the new shareholders had valued AirAsia at US$100mil (RM380mil).
He added that the newly-injected capital would be used to further enhance the company's financial base, and to facilitate the company's expansion plans, including the recent purchase of four Boeing aircraft.
Last week, AirAsia entered into leasing and purchasing agreements worth US$100mil to increase its fleet by 11 aircraft.
The company would lease seven Boeing 737-300 aircraft and acquire four of the same from GE Capital Aviation Services. Upon full delivery by the middle of next year, the company would have 18 aircraft compared with seven now.
“AirAsia's new partners bring to the company an ideal combination of strategic value-add and increased financial strength,'' Fernandes said.
“AirAsia believes that this investment is a definitive confirmation of the company's success to date, its future potential and, ultimately, Malaysia's position in the international community as an exceptional location for investment.”
He reiterated that AirAsia would not push forward its regional expansion plan before establishing a foothold in the Malaysian market.
“We will not rush into the region. We want to stay clear, focusing on what we do best, that is, operating on efficient low-cost structure. We will not be pushed into doing this and that,'' Fernandes said.
Meanwhile, Richard Scanlon, vice-president for investment banking, Credit Suisse First Boston, the financial adviser to AirAsia, said that due to the recent Iraq war and the outbreak of severe acute respiratory syndrome (SARS), the share placement had taken longer to close.
Nevertheless, he said, the deal had attracted numerous investors, including those in the United States, Europe, and Singapore, as well as local investors.
“This exercise had attracted serious interest from not less than 10 international investors, some of them very prominent names,'' Scanlon said.
He said one reason for the strong interest in AirAsia was its superior return on investment.
“These international private equity investors will not invest in a company that carries an internal rate of return of less than 30%. The fact that there's been great interest in this airline company tells it all.''