AirAsia, the airline founded by Malaysian tycoon Tony Fernandes, will raise up to $238 million to fund its recovery and digital pivot.
AirAsia Group, which is controlled by Tony Fernandes, announced late Monday that it will raise up to 1 billion ringgit ($238.6 million) from existing shareholders through a convertible debt offering, as the budget carrier prepares to resume flights by the end of the year and build its digital platform.
The company said existing shareholders can subscribe to 7-year redeemable convertible unsecured Islamic debt securities (RCUIDS) with a nominal value of 0.75 ringgit each on a two-for-six basis. Free detachable warrants are included with the debt instruments.
“Fundraising is critical to our recovery strategy,” AirAsia group CEO Fernandes, 57, said in a statement.
The additional capital raised from shareholders will provide the airline with sufficient liquidity to weather the lingering effects of the Covid-19 pandemic, which has forced countries such as Malaysia and Australia into lockdown as governments attempt to contain the virus’ spread. AirAsia has been in the red for seven consecutive quarters, reporting a first-quarter net loss of 767.4 million ringgit.
Despite the growing losses, Fernandes remains optimistic that global air travel will resume gradually between now and the first quarter of 2022.
“There is a glimmer of hope at the end of this long tunnel,” Fernandes said, noting that vaccines are being aggressively rolled out in key markets.
AirAsia announced in May that it intends to raise up to 2.5 billion ringgit via a combination of debt and equity sales. It raised 336 million ringgit earlier this year through share placements.
The proceeds from the rights issue of RCUIDs, which is expected to close in the fourth quarter, will be used to settle fuel hedges, aircraft leases, and to fund the group’s digital initiatives, according to the company.
“While the airline will continue to underpin all operations, our digital transformation strategy has gained significant traction over the last 18 months, with significant improvements in all key metrics for our Airasia super app, logistics and e-commerce venture Teleport, and our fintech business BigPay,” Fernandes said.
BigPay—which aims to expand its services beyond international remittance and digital payments—is vying for one of Malaysia’s five digital banking licenses.
The airline agreed last week to acquire Gojek’s Thai operations in a stock swap, giving the Indonesian ride-hailing giant a 4.76 percent stake in AirAsia Digital.
Fernandes previously stated that the deal, which values AirAsia Digital at $1 billion, will “boost” the airline’s ambition to become one of Southeast Asia’s leading super apps.