AirAsia X: The trauma of a budget carrier valued at 1 sen

PUBLICINVEST Research has reiterated its “underperform” call on AirAsia X Bhd with a target price of 1 sen on the back of bleak prospects emanating from its debt restructuring exercise – and with the latter being now classified as a Practice Note 17 (PN17) company.

On Friday (Oct 29), AirAsia X Bhd revealed that it is now classified as a PN17 company after its external auditor Ernst & Young PLT (EY) expressed a disclaimer of opinion on its audited financial statement for the 18-month financial period ended June 30, 2021

The budget carrier has 12 months to regularise its financial condition, failing which it will be delisted from Bursa Malaysia.

Even now, AirAsia X is currently undertaking a proposed debt and corporate restructuring as well as looking to raise new equity funding to restart its operations when international borders reopen.

The scheme creditors’ meetings in respect of its proposed debt restructuring are to be held on Nov 12. At least 75% of each class of scheme creditors in the meeting are required to vote favourably for the proposed debt restructuring exercise prior to the implementation of the proposed corporate restructuring and fundraising.

To recap, this is not the first time AirAsia X triggered the PN17 criteria. The sister company of AirAsia Group Bhd had on July 30 last year triggered PN17 criteria after its shareholders’ equity on a consolidated basis fell to less than 25% of its share capital.

EY had also issued an unmodified audit opinion of its ability to continue as a going concern in respect of AirAsia X’s audited financial statement for its FYE Dec 31, 2019.

However, AirAsia X was not classified as a PN17 company back then due to relief measures provided by Bursa Securities on listed issuers that have triggered the criteria for the classification from April 17, 2020 to June 30, 2021.

“AirAsia X continues to face severe liquidity constraints and all hopes are on successful debt restructuring and new equity funding from existing and new investors to provide sufficient capital to restart operations when international borders reopen,” opined PublicInvest Research in a company update.

“While shareholders have approved all the proposals at the extraordinary general meeting (EGM) on June 1, the implementation of the fund raising exercise can only be implemented upon successful completion of the proposed debt restructuring exercise.”

Above all else, AirAsia X also faces the wrath of passengers following its recent offer to refund only 0.5% of the amount owed to them under the carrier’s proposed debt restructuring exercise which will be put to vote on Nov 12.

According to AirAsia X, the exercise – if approved – will be a full and final settlement and the company will not be liable to any legal action from any creditor after that. However, it also warned that AirAsia X is expected to go into liquidation if it fails to get the nod.

To illustrate how much passengers can expect to get, the airline said anyone who is owed RM2,000 will get RM10 as “profit-sharing” on the anniversary of the approval of this exercise, adding that they will get similar returns for four years after that based on a specified formula outlined.

It is learnt that AirAsia X owes about RM600 mil to passengers and travel agents, thus it will have to pay RM2.9 mil as settlement if approved.

At 11.38am, AirAsia X was down 1.5 sen or 15.79% to 8 sen with 72.95 million shares traded, thus valuing the company at RM332 mil. – Nov 1, 2021

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