AirAsia X shows court creditors’ support for restructuring plan

AirAsia X shows court creditors’ support for restructuring plan
The AirAsia X Bhd is seeking to restructure $15.87 billion of debt. (Reuters)
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Updated 14 January 2021

AirAsia X shows court creditors’ support for restructuring plan

AirAsia X shows court creditors’ support for restructuring plan
  • Supportive lessors said they wanted to continue discussions with the budget airline and potential new investors

KUALA LUMPUR: Most of AirAsia X Bhd (AAX)’s lessors support a restructuring plan, and the Malaysian airline has received interest from potential investors for fundraising after reorganization, court documents filed this month show.
In emails attached to the court filings, supportive lessors said they wanted to continue discussions with the budget airline and potential new investors, seeking more equitable terms and new commercial arrangements.
The affidavits come after more than a dozen creditors filed to intervene with its proposed court-supervised restructuring, with lessor BOC Aviation Ltd. and airport operator Malaysia Airports Holdings Bhd arguing that AAX is “hopelessly insolvent.”
Planemaker Airbus also filed a lawsuit last month saying it could lose more than $5 billion worth of aircraft orders if the low-cost, long-haul carrier proceeded with the plan.
AAX’s senior legal counsel, Shereen Ee, said in court documents seen by Reuters that 15 out of 20 aircraft lessors were not in favor of AAX liquidating, and three other interveners – Airbus, Rolls-Royce Group and BNP Paribas – were “not objecting” to the restructuring plan.
Lessors in favor of a restructuring include Macquarie Aircraft Leasing Services and Aircastle, according to the documents. Rolls-Royce, Macquarie Aircraft Leasing Services and Aircastle did not immediately respond to requests for comment.
An Airbus spokesman declined to comment, saying that the company was continuing discussions but that the details are confidential. AirAsia X also declined to comment.
BNP Paribas – which is a trustee acting on a creditor’s instructions – declined to comment.
Aircastle Asia Pacific executive vice president Nigel Harwood told AAX in an email that his firm was not seeking liquidation of the airline, according to the court filings.
“We look forward to working with you to arrive at a revised commercial arrangement once we understand your future business plan with the introduction of new investors,” he said.
Macquarie’s email said it was willing to support a recapitalized AAX and make a restructured lease agreement on condition that the airline has a detailed business plan, credible third-party investors and that lessors have a meaningful say, according to the filings.
AAX said it had received 10 letters from Malaysian and Singaporean corporations and high net worth individuals indicating interest to participate in its proposed fundraising exercise, according to an affidavit.
The 10 includes Tune Group Sdn Bhd, owned by AirAsia Group Bhd co-founders Tony Fernandes and Kamarudin Meranun. Tune is the largest AAX shareholder, with a 17.83 percent stake.
AAX said it also received interest from a public-listed financial group and the subsidiary of another, both preferring to be unnamed.
AAX, an affiliate of AirAsia Group, last month said it planned to raise up to $49.49 million by issuing shares to new investors after its debt restructuring.
The airline is seeking to restructure $15.87 billion of debt. Its accrued debt amounts to $554.28 million, without taking into consideration contingent debts such as its large aircraft order book with Airbus.
Some lessors have argued the Airbus orders should be excluded. However, AAX said the contingent debts must be dealt with and will be reduced by the re-negotiated leases and other commercial contracts.
AAX estimated that lessors that continue with the airline post-restructuring would be able to recover approximately 44 percent-66 percent of their lease rental loss under new agreements.


Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades
Updated 16 January 2021

Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades

LONDON: Global shares stumbled on Friday as hopes of a fiscal boost from a $1.9 trillion US stimulus plan were smothered by the prospect of stricter lockdowns in France and Germany and a resurgence of COVID-19 cases in China.
European stocks followed Asian markets lower, with the pan-European STOXX 600 down 0.8 percent and London’s FTSE 100 0.8 percent weaker, with the latter clobbered by data showing Britain’s economy shrank in November for the first time since the initial COVID-19 lockdown last spring.
The MSCI world equity index, which tracks shares in 49 countries, was 0.3 percent lower. S&P 500 e-mini futures shed 0.3 percent to 3,779.
Oil prices, which had risen on a weak dollar and strong Chinese import data, dropped as COVID-19 concerns in China hit sentiment.
Brent was down $1.33, or 2.3 percent, after gaining 0.6 percent on Thursday. US West Texas Intermediate crude was down $1.17, or 2.1 percent at $52.44 a barrel, having risen more than 1 percent the previous session.
Brent and US crude were heading for their first weekly declines in three weeks.
Spot gold rose 0.1 percent to $1,847.00 per ounce.
While oil producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts versus lockdowns, financial contracts have been boosted by strong equities and a weaker dollar, which makes crude cheaper, along with strong Chinese demand.
“The recent resurgence in coronavirus infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major OECD economies has clouded the economic and demand recovery,” said Stephen Brennock of oil broker PVM.
“Simply put, near-term demand expectations aren’t too promising.”
Earlier on Friday, an Asian regional share index had edged near record highs after US President-elect Joe Biden proposed a $1.9 trillion stimulus plan to jump-start the world’s largest economy and accelerate its response to the coronavirus.
In prime time remarks on Thursday, Biden outlined a proposal that includes $415 billion aimed at the COVID-19 response, some $1 trillion in direct relief to households, and roughly $440 billion for small businesses and communities hard hit by the pandemic.
But that initial boost later faded as risk appetite waned, lifting bond prices and the dollar, and hitting equities.
“People are saying it’s a big number but markets are almost acting like its a disappointment,” said James Athey, investment director at Aberdeen Standard Investments.
“I think maybe the market was pricing an additional $2,000 cheque going to the US population, but what’s being proposed is a top-up of $1,400 to take the total to $2,000 because $600 has already been agreed.”
Investors also digested the prospect of rising taxes to pay for the plan.
“The concern is what it’s going to mean from a tax stand point,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don’t often ignore taxes.”
Biden’s comments came after US Federal Reserve Chair Jerome Powell struck a dovish tone in comments at a virtual symposium with Princeton University.
Powell said the US central bank is not raising interest rates anytime soon and rejected suggestions the Fed might start reducing its bond purchases in the near term.
Investor concerns over the prospects for a global economic recovery were raised after France strengthened its border controls and brought forward its night curfew by two hours to 6 p.m. for at least two weeks to try to slow the spread of infections.
German Chancellor Angela Merkel called for “very fast action” to counter the spread of variants of the coronavirus.
Chinese blue chips eased 0.2 percent, snapping a four-week winning streak, after the country on Friday reported the highest number of new COVID-19 cases in more than 10 months.
US earnings season kicked into full swing with results from JPMorgan, Citigroup and Wells Fargo.
JPMorgan Chase reported a much better-than-expected 42 percent jump in fourth-quarter profit on Friday, driven by the release of some of the reserves it had built up against coronavirus-driven loan losses.
Investors will be looking to see if banks are starting to take down credit reserves, resume buybacks, and provide guidance that shows the economy is improving, said Thomas Hayes, chairman of Great Hill Capital in New York.
In the currency market, the US dollar rose.
The dollar index was at 90.407 versus a basket of currencies, up 0.2 percent on the day.
It was on track for a weekly gain of around 0.4 percent, making this its strongest week since November.
Against the stronger dollar, the euro was down 0.2 percent at $1.21325.
US yields stepped back as risk appetite waned. Benchmark 10-year Treasury notes yielded 1.1039 percent, down from a US close of 1.129 percent on Thursday, while the 30-year yield dipped to 1.8451 percent from 1.874 percent.
In Europe, Italy’s bond market was poised to end the week calmer, as 10-year bond yields were down 2 basis points at 0.59 percent.
Italian Prime Minister Giuseppe Conte resisted calls to resign on Thursday after a junior coalition party led by former premier Matteo Renzi pulled out of the government on Wednesday and stripped it of its majority.