KUALA LUMPUR - Reuters AirAsia X Bhd AAX is proposing to pay only 0.5% of debt owed to each of its creditors and terminate all existing contracts so that it can restructure 33.65 billion Ringgit $8.1 billion in liabilities, a document seen by Reuters shows.
On Monday, the Malaysian AirAsia Group Bhd, a sister airline to Low-Cost Long Haul Airlines, confirmed with the stock exchange that it had set a date for Nov. 12 for creditor meetings to vote on the restructuring proposal.
To allow the airline to fly again and to avoid liquidation, the only option is for AAX to undertake the proposed debt restructuring, the airline said in a 127 - page explanatory statement for the meeting that was sent by Reuters to creditors.
Half the total liability is the cost of terminating airplane orders from its largest creditor Airbus SE for 78 A 330 neo widebodies and 30 A 321 neo narrowbodies, the document said.
AAX also proposed that if it were to garner more than 300 million ringgit $72 million in annual earnings after interest, tax, depreciation and amortisation, lease rentals and restructuring costs during its 2023 - 2026 financial years, all creditors except Airbus would be entitled to 20% of these earnings regardless.
It is one of the many carriers in the Asia-Pacific region to have entered a court-overseen debt restructuring process to survive the pandemic. The 0,5% of the debt owed to each creditor will be paid from operating cash flow one year after the debt restructuring goes into effect, the airline said in the document.
AAX also said it is in negotiations with the lessors of 29 airplanes and certain other creditors on continued or future commercial terms for certain other business relationships.
It is giving lessors the option of returning planes to AAX on new terms or to accept the termination of the lease and operate the relevant planes back. Two lessors have already indicated they want to terminate the leases, AAX said in the document.
The airline added its scheme aims to arrive at a sustainable business and debt structure that contributes and to strengthen the group's financial position.
To gain the consent for its proposal, AAX needs approval from creditors holding at least 75% of the total debt value in each class of creditors.