Malaysia’s AirAsia X (AAX) is proposing to pay around 0.5 percent of the debt owed to its creditors, and to terminate all existing contracts in order to allow the long-haul low-cost carrier to restructure its liabilities, reports Reuters, citing a document that it had seen. This is ahead of a court convened meeting between the carrier and 15 parties, scheduled for 12 November. These parties have also been broken down into three classes of creditors.

In a Bursa Malaysia disclosure, AirAsia X indicates the meeting is “for the purpose of considering and if thought fit, to approve, with or without modification(s) Proposed Debt Restructuring on the terms as detailed in the Explanatory Statement of AAX dated 18 October 2021 (“Explanatory Statement”)”.

The Reuters report goes on to indicate that half of AirAsia X’s liabilities of 33.65 billion ringgit covers the cost of terminating aircraft orders from Airbus for 78 A330neos and 30 A321neos. The number of aircraft is similar to an Airbus statement from 30 August 2019, which announced at the time that AirAsia X had raised the number of A330neos on order from 66 to 78, while adding a new type — A321XLRs — to its order book. The status of the order has been in doubt for some time.

Should AirAsia X earn “more than 300 million ringgit” in annual earnings before interest, tax, depreciation and amortisation, lease and restructuring costs between the 2023-2026 financial years, it has been proposed that creditors would be entitled to 20 percent of the earnings. However, Airbus has been excluded from those earnings.

The carrier is also proposing that 0.5 percent of debt owed to the creditors are to be paid from its operating cash flow one year after the debt restructuring takes effect.

Meanwhile, negotiations with lessors and certain other creditors are ongoing. Lessors have the option of continuing to place their aircraft with the carrier or to terminate their leases. For the proposal to be approved, AirAsia X will have to secure the support from each class of creditors holding “at least” 75% of the total debt value, adds the Reuters report.

AirAsia X had first proposed a debt and corporate restructuring in October 2020. The proposal at the time was to restructure its 63.5 billion ringgit debt “into an acknowledgement of indebtedness by AAX for a principal amount of up to 200 million ringgit”, and that the corporate restructuring would cover share capital reduction and share consolidation.

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