Malaysian capital A rejects $119m loan due to conditions

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Capital A, formerly AirAsia Group, has opted out of a syndicated loan of up to MYR 500 million ringgit ($119 million) under a guarantee scheme run by the state-owned financial institution Danajamin Nasional because he felt some of the attached conditions were unreasonable, said group CEO Tony Fernandes.

The parent company of AirAsia (AK, Kuala Lumpur Int’l) had revealed in a filing in Bursa Malaysia on March 10 that it would not proceed with the 80% state-guaranteed loan, which it had initially announced in last October, “because it is unable to accept and/or meet certain conditions” set by the national financial guarantee insurer. It is “now exploring other debt financing alternatives available with acceptable terms,” he added.

One of the conditions of the club’s installation was that its co-founders – Fernandes and his longtime business partner Kamarudin Meranun – were the guarantors of the loan. The two hold a combined 24.64% stake in Capital A through the entities Tune Air (12.41%) and Tune Live (12.23%).

A second condition the group objected to was that Danajamin Nasional had asked it to submit a ‘regularization plan’ for Bursa’s approval to remedy its negative equity, or to obtain an extension to provide the plan. for the same term as the syndicated loan.

Capital A said in January that Bursa Malaysia had rejected its request for an extension of a period of relief that prevented it from being classified as a Practice Note 17 (PN17) company, a status that concerns companies in financial difficulty.

“We decided not to proceed with the club facilities as we felt some of the conditions imposed were unreasonable. The required approvals from Bursa Malaysia were not within our control, and although we requested an extension of time to provide a regularization plan, our request was ultimately denied,” Fernandes explained in a statement the following day.

“Kamarudin and I remain committed to the recovery of Capital A after being actively involved in leading the group through this crisis day in and day out for the past two years,” he said, adding that to support the group’s turnaround plan, they had personally injected 257.3 million MYR (61.4 million USD) on the 974.5 million MYR (232.6 million USD) rights issue which was finalized on 31 December.

“However, while we are willing to provide the requested personal guarantees in addition to our previous cash support […]such a demand for us to guarantee everyone’s exposure is unseemly for a publicly traded company given that we are only two of Capital A’s many shareholders, which also include institutional investors.

Fernandes insisted that Capital A’s fundraising strategy remains on track to maintain operations in 2022, aiming to “return to profitability and deliver value to our shareholders again in the near future. “.

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