STRICT CONDITIONS: Khazanah expects to recoup RM6b under recovery plan by 2020
KHAZANAH Nasional Bhd is confident of recovering the RM6 billion it will inject into Malaysia Airlines (MAS) as the national carrier braces for a comprehensive overhaul of its business.
Its managing director Tan Sri Azman Mokhtar said the fund is not a bailout for the ailing carrier as it comes with strict conditions.
“While it is imperative that MAS as a critical enabler in national development is revived, public accountability for the use of the funds means that it cannot be renewed at any cost,” Azman said at a media briefing on the airline’s five-year recovery plan, here, yesterday.
Khazanah, the government’s investment arm, had injected some RM7 billion into MAS in the past 10 years to help it weather challenging environments and continuous financial losses. Five years ago, RM5.7 billion was pumped into the airline through three rights issues.
Azman said the RM6 billion will be pumped into MAS on a staggered and conditional basis over three years.
He added that Khazanah expects to recover the money between 2018 and 2020, after the airline is able to stand on its feet and re-listed under a new company (NewCo).
The NewCo is expected to be operational by July 1 next year.
According to the MAS recovery plan, out of the RM3 billion to be allocated for the old MAS, RM1.4 billion will be paid to minority shareholders as part of the airline’s delisting exercise, which is expected to be completed by December. The balance will be for restructuring and retrenchment costs.
The remaining RM3 billion will be for the start-up of the NewCo.
“We believe the RM3 billion that will be put into the new MAS is the right capital structure as an initial injection. The assets and liabilities of MAS will move over from the old company to new one.
“The government has committed to also move the necessary licensing and other requirements i.e. AOC (acquisition of control, the right to move over tax losses),” Azman said.
The recovery plan does not include a break-up of MAS, which also has a maintenance, overhaul and repair arm as well as a cargo subsidiary.
Khazanah also plans to reduce MAS’ net gearing (net debt over shareholders’ funds) from 290 per cent currently to 120 per cent through debt-to-equity swaps.
“In this regard, we are pleased to announce that Kumpulan Wang Persaraan (KWAP) has agreed to swap a total of up to RM750 million of their existing perpetual sukuk into ordinary equity, subject to a definitive agreement between the relevant parties,” Azman said.
On MAS’ delisting, Azman said it will be a good control measure in terms of financial and operational discipline.
The carrier, he added, is going through a rebirth and it is, thus, not a time for it to be listed and having to comply with the various rules and regulations.
“Nonetheless, we recognise that public interest is high… we will institute public accountability briefings at appropriate junctures.”
Meanwhile, the NewCo will have its own organisational structure, with a new chief executive officer to be announced by year-end.
“We are looking at both Malaysian leadership talent who may and may not be from the aviation industry as well as global aviation specialists. I think we should not rush because some of the people we are speaking to have existing contractual obligations,” Azman said.
-NST
