AirAsia's potential management-led buyout faces headwinds

Wed Oct 7, 2015 7:52am EDT
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By Yantoultra Ngui and Anshuman Daga

KUALA LUMPUR/SINGAPORE (Reuters) - AirAsia founder Tony Fernandes may find it tough to take the budget airline private due to large funding needs as potential partners worry about a floundering Malaysian economy and a weak regional aviation market.

Reuters exclusively reported on Tuesday that AirAsia's founders were talking to banks to secure financing for a management-led buyout, which could be launched this year.

Fernandes and his business partner Kamarudin Meranun, who together own about 19 percent of AirAsia through a holding firm, would need about $800 million to take it private, based on a 25 percent premium, analysts said.

"We think it is a challenge to secure financing," Maybank analyst Mohshin Aziz said in a report.

Fernandes founded AirAsia in 2001 with two aircraft and it has since become Asia's largest budget airline with a fleet of over 170 Airbus jets serving Thailand, Indonesia, Philippines and India.

But after the 2008 financial crisis and the growth of Jetstar Asia and Lion Air, AirAsia's business has been hit.

AirAsia has come under scrutiny since June when GMT Research issued a critical report questioning its accounts and warned of high debt levels, driving its shares down to seven-year lows.

Fernandes has steadfastly backed AirAsia's finances. He said in June the airline could easily raise $1 billion by sale and lease back of aircraft and that it had investments worth $500 million.   Continued...

A girl pushes the door of an AirAisia ticketing office at Soekarno-Hatta Airport in Jakarta, July 8, 2015. REUTERS/Beawiharta