Malaysia's Capital A will ask shareholders to approve a capital reduction of up to MYR6 billion ringgit (USD1.36 billion), allowing the company to offset its accumulated losses and shore up its balance sheet.
Capital A, which ultimately controls AirAsia (AK, Kuala Lumpur International) and AirAsia X, and holds stakes in their various AirAsia-branded sibling carriers, told Bursa Malaysia in an April 15 filing that it would ask shareholders to vote on the matter at a May 7 extraordinary general meeting.
Pending shareholder approval at the May meeting, Capital A will submit the proposed capital reduction to Malaysia's High Court for confirmation. The company hopes to complete the capital reduction by June.
"I’m confident this regularisation plan puts us on a stronger path to long-term value creation," said Fernandes. "We look forward to securing shareholder support on May 7."
The write-down is a component of Capital A's proposed regularisation plan, which the company must submit to the stock exchange as part of its Practice Note 17 (PN17) status, imposed on listed companies it considers to be in financial distress. Among other things, PN17 companies must regularise their financial affairs and submit a regularisation plan explaining how they plan to do this. The alternative is a delisting. The filing says Capital A's shareholder equity will decrease to around MYR742.1 million (USD168.4 million) after the capital reduction.
Another part of the plan is the sale of Capital A's aviation business to AirAsia X Berhad. Shareholders have already approved this. Ultimately, Capital A's backers, Kamarudin Meranun and Tony Fernandes, will retain most of their financial interests in the various short-haul AirAsia airlines via their direct and indirect stakes in AirAsia X. However, Capital A maintains that the divesture allows it to focus entirely on its non-aviation portfolio of high-growth businesses that "better reflect Capital A's future direction."
