AirAsia to raise US$300m to cut foreign associates' debt

PARIS : AirAsia Bhd confirmed plans to issue up to US$300 million (RM1.13 billion) bonds for its loss-making associates in Indonesia and Philippines in three months, in a bid to cut debts by half, said group CEO Tan Sri Tony Fernandes.
He added that AirAsia may re-capitalise some of the money through the upcoming initial public offerings (IPOs) to maintain its 49% stake.
Fernandes said the move is part of a three pronged strategy to prime the two loss-making associates for an IPO in 2017.
"The plan was always to raise capital in these two companies," he told the Malaysian media at the Paris AirShow in Le Bourget here yesterday, where AirAsia was named the World's Best Low Cost Airline and Asia's Best Low Cost Airline for the seventh consecutive year at the Skytrax World's Airline Awards.
This he said, will firstly be done by a capital injection by 'local shareholders', followed by the bonds issue and finally an IPO.
"The first instance is to make sure that these are investable companies and both Philippines and Indonesia are turning around very nicely," he said.
He said both Philippines and Indonesia are poised to turn around and reap profits in the third and fourth quarters respectively.
Fernandes also dismissed suggestions that the company expedited the bonds plan following a report by Hong Kong based firm GMT Research, which questioned AirAsia's accounting practices, that has led to Air Asia's shares taking a beating.
The stock fell 15 sen or 8% to RM1.68 yesterday, extending losses it saw on Monday.
Fernandes attributed the slide in stock price to the sluggish local stock market and currency depreciation.
"As long as we continue to deliver the results then we are not to concerned about it. Our track record speaks for itself," he said.
"We had a very good first quarter and if we continue to perform in the same way then our stock price would improve," he added.
Fernandes also defended AirAsia's accounting practices saying that it has always been transparent.
"The fact that someone can do such an analysis means that we disclose so much already," he said, adding that the group has always wanted to consolidate its accounts.
He said AirAsia could generate cash from each of those assets (120 aircraft) and investment (Expedia and Tune Insurance) but emphasised that it is "not going to change our strategy just because of one report".
On another note, Fernandes said for its Japan venture, AirAsia will be submitting its application for an Air Operators Certificate in the next few weeks. He expects the venture to start operations early next year.