SEPANG (March 25): AirAsia Aviation Group Ltd, the aviation business of Capital A Bhd (KL:CAPITALA), said on Tuesday that it is in the final stages of securing up to RM1 billion in debt financing from an undisclosed domestic bank to partly refinance its US dollar-denominated debt and for other corporate purposes.

Its deputy group CEO Farouk Kamal said the financing deal, expected to be in ringgit, is aimed at paring down the low-cost carrier's "expensive" US dollar borrowings that were undertaken during the Covid-19 pandemic.

AirAsia Aviation Group has about RM4.3 billion in borrowings, of which around RM3.6 billion is denominated in US dollars, Farouk said.

"As we (Capital A) exit the Practice Note 17 (PN17) status, the appetite from domestic bank lending will be there," he told reporters at a press conference here, referring to parent Capital A's plan to exit PN17 status by May 2025.

Capital A had earlier this month obtained approval from Bursa Malaysia for its proposed regularisation plan, which involves a capital reduction of up to RM6 billion to eliminate losses it had incurred during the pandemic and a restructuring of its business units to focus on its core businesses.

The refinancing, Farouk said, will result in "immediate interest cost savings, which goes straight to the bottom line for us".

The airline's US dollar debt currently carries interest rates of around 11% to 12%, he said, whereas domestic bank lending could lower this to about 7% to 8%. "So that is quite a huge interest cost savings there," he added.

Beyond bank loans, Farouk said AirAsia Aviation Group, which is being sold to sister company AirAsia X Bhd (KL:AAX), is actively exploring refinancing and fundraising options, including tapping the bond market. "We are looking at loan lending but we are also exploring the public bond markets," he said.

In August 2024, Capital A announced it had secured a US$443 million (RM1.96 billion) dual tranche revenue bond to refinance the lease liabilities of AirAsia Bhd, another aviation unit under the group. The proceeds were earmarked to cover aircraft and engine maintenance costs, and to support its working capital needs.

AAX is in the process of acquiring both AirAsia Aviation Group and AirAsia, in exchange for RM3 billion worth of AAX shares, and for AAX to assume the RM3.83 billion debt that Capital A owes the aviation business. It is also in the midst of raising RM1 billion via a placement of shares.

Shares of Capital A closed up 1.5 sen or 1.9% to 80.5 sen on Tuesday, giving the group a market capitalisation of RM3.49 billion. Meanwhile, AAX closed up two sen or 1.3% to RM1.54, bringing its market capitalisation to RM688 million.

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