SINGAPORE/KUALA LUMPUR (REUTERS) - AirAsia Bhd has hired investment banks Credit Suisse and CIMB to help the Malaysia-based budget airline raise at least US$200 million (S$273.8 million) in convertible bonds at its Indonesian and Philippine associates, people familiar with the deal said.
AirAsia's finances have come under scrutiny as amounts owed to it by its lossmaking associates in Indonesia and Philippines have steadily risen, burdening AirAsia's balance sheet.
The bond issues are part of a capital-raising plan by the regional affiliates of Asia's biggest budget airline and could help alleviate the risk of AirAsia taking writedowns on receivables from the two associates.
The receivables were the centrepiece of a critical June 10 report on AirAsia by Hong Kong-based GMT Research, which sent the airline's shares slumping by as much as 39 per cent to five-year lows. Regulatory issues in Indonesia have also affected AirAsia's shares, which are down by nearly half in 2015.
AirAsia is aiming to complete the bond issues in a few months, the people added.
AirAsia, Credit Suisse and CIMB declined to comment. The sources declined to be identified as details of the funding are not public. "The Philippines' deal is at a more advanced stage but the Indonesia one is taking time as it's a tougher sell," said one Singapore-based banking source familiar with the deal. "If they pull this through, it addresses a short term problem but those companies still need to turn a profit and that's a challenge," the source added.
Last month, AirAsia said its business performance was improving at its Philippine and Indonesian associates.
AirAsia's regional affiliates are facing cut-rate competition and they are being recapitalised.
Tony Fernandes, AirAsia group CEO, said on Monday the company will recapitalise its Indonesian affiliate so that the unit can meet a rule set by the country's transport ministry.
AirAsia has announced plans to take the associates in Philippines and Indonesia public in 2017, seeking valuations of about US$700 million for the Indonesian associate and about US$600 million for the Philippines associate. But bankers have said the valuations were optimistic.