Creditors of AirAsia X have agreed to a restructuring that will pay just 0.5% of debt owed and enable the company to rebuild its business, the Malaysian long-haul low-cost airline said on Friday.
The airline will now embark on its recapitalisation, which was approved by its shareholders in June 2021. Completion is expected in the first quarter of 2022.
Air Asia X said creditors had voted almost unanimously in favour of the plan to restructure 33.65 billion ringgit ($8.1 billion) of liabilities.
Creditors agreed to take a 99.5% debt haircut, with the strength of the approval surprising analysts, given the initial negative reception given to the plan.
“When the scheme was initially announced in October 2021, it was comprehensively rejected and widely derided as being wholly inadequate and unreasonable,” Air Asia noted in a statement.
But the airline argued a “wide and deep reset is required to provide the desired platform to rebuild the business”.
The haircut means Air Asia X would be one of very few airlines worldwide with no gearing. “We will be in an excellent position to capture leisure travel and cargo opportunities post-Covid-19,” the company said.
The airline hopes Malaysia will relax travel restrictions by December.
Analysts are upbeat about the carrier’s fortunes. “AirAsia’s fundraising initiatives are gaining momentum,” said Isaac Chow, equity analyst at Daiwa Capital Markets.
A recent approval of a 500 million ringgit loan “is set to boost liquidity and lift confidence”, he added.
Shares in Air Asia X rose as much as 33% to their highest since November 1 after the announcement. “The recent price gain should fuel a good take-up for a 1 billion ringgit rights issue,” Chow said.
• George Russell