AirAsia weighs raising $234 million via rights issue

AirAsia Group Bhd. is considering raising about 1 billion ringgit ($234 million) through a rights issue after an external auditor raised concerns about its viability, according to a person with knowledge of the matter.

The budget carrier is working with an adviser on the planned capital raising, said the person, who asked not to be named as the information is private. AirAsia is also weighing raising additional funds via the sale of stakes in its digital and cargo units in order to further strengthen its financial position, said the person.

Deliberations on the planned rights issue and stake sales are still ongoing and AirAsia may decide not to proceed, said the people. A representative for AirAsia declined to comment on the matter.

AirAsia, like other airlines globally, has been adversely impacted by the pandemic coronavirus which crimped demand for air travel following border controls and health concerns.

The Malaysian carrier reported a record first-quarter net loss of 803.8 million ringgit compared with net income of 96.1 million ringgit a year earlier, according to a stock exchange filing on Monday. Its current liabilities already exceeded its current assets by 1.84 billion ringgit at the end of 2019, even before the pandemic.

The company’s auditor Ernst & Young warned in a statement to the Kuala Lumpur stock exchange Tuesday that the airline’s ability to continue as a going concern may be in “significant doubt.”

Shares in the budget airline, which were temporarily halted until 2:30pm, closed down 17.5% on Wednesday. They have fallen nearly 59% in the year to date, giving the company a market value of $551 million.

The International Air Transport Association said last month the industry’s debt has surged by about $120 billion, a level many carriers will be unable to sustain without governments stepping in to convert borrowing into equity. The trade group predicted the sector would suffer a record loss of $84 billion in 2020, more than three times the $31 billion hit seen during the 2008-2009 recession.