AirAsia share sale to raise up to RM665m

From The Business Times:

AirAsia will sell 400 million new shares, representing 16.8 per cent of its share capital, at RM1.33 to RM1.40 a share

AIRASIA (5099), Southeast Asia's largest budget carrier by fleet size, is expected to raise up to RM665 million in a new share placement as it seeks to cut its debt.

Demand for full-fare carriers has been hit by the economic downturn, which has given a boost to discount airlines.

AirAsia said last month that proceeds from the share sale would be used to reduce its debt, which has risen sharply following aggressive capacity expansion.

AirAsia will sell 400 million new shares, representing 16.8 per cent of its existing share capital, at RM1.33 to RM1.40 a share, according to the deal term sheet obtained by Reuters, to raise up to RM560 million.

However, the sale also has an upside of 75 million shares on top of the 400 million shares offered, the term sheet said, meaning that AirAsia could potentially raise a total of RM665 million.

CIMB and Credit Suisse are joint placement agents for the exercise and bookbuilding will be completed today.

AirAsia stock closed down 0.7 per cent yesterday at RM1.41. Stock exchange regulator Bursa Malaysia Bhd said that AirAsia shares would be suspended today pending an announcement.

Regional budget carriers such as AirAsia and Jetstar Asia Airways have either added capacity or increased flight frequencies to cope with higher demand.

Analysts in Malaysia said last month that AirAsia's tight cash flow and high debt level was worrying given its commitment to fund aircraft deliveries.

Last month, it deferred the delivery of eight Airbus A320 planes to 2014 from next year, which analysts said signalled potential overcapacity in the future. - Reuters

Most likely, Air Asia must be having trouble getting loans/bonds issues to refinance. It's tough being an AirAsia shareholder. I only hope this share placement is an update of the previous one. If not, we're talking about major shareholder dilution of a billion plus this year!

Air Asia is really milking Tony Fernandes' rock star status and reputation as a savvy businessman. Does he really know what he is doing? I don't think investors are so easily swayed now and the con game won't last much longer. People are realizing Tony Fernandes is starting to look very ordinary.