Exclusive: AirAsia founder began buyout talks as share fall put loans at risk - sources

Fri Oct 30, 2015 3:19am EDT
 
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By Saeed Azhar and Anshuman Daga

SINGAPORE (Reuters) - AirAsia founder Tony Fernandes began talks with bankers to take Asia's No.1 budget airline private after a plunge in its stock price put $200 million worth of loans borrowed against AirAsia's shares at risk, people familiar with the situation told Reuters.

The Malaysian entrepreneur and his business partner Kamarudin Meranun, respectively Group CEO and Chairman of AirAsia Bhd (AIRA.KL: Quote), borrowed the money against their 19 percent indirect holding in AirAsia from Credit Suisse CSGN.VX and CIMB (CIMB.KL: Quote) to help fund private ventures, people familiar with the situation said.

A fall in AirAsia's share price though has led to a breach of the loans' collateral terms, according to two sources, and is one reason why the two businessmen have begun talks for a possible management-led buyout.

Fernandes and Kamarudin did not reply to emails sent by Reuters or phone calls made to them. A Malaysia-based spokeswoman at AirAsia declined comment.

The existence of the loans, which has not been publicly disclosed as the transaction is private, shows how the future of the airline, a key client of Airbus in Asia, is tied to the other investments of its founders.

Two sources with knowledge of the situation said the loans were taken to help finance the 2011 purchase by Fernandes' holding company, Tune Group, of English soccer club Queens Park Rangers and to build up the Caterham Formula One team, two ventures which have subsequently struggled.

Share-backed loans, common among Asian tycoons, require a large amount of collateral as they are subject to stock market volatility.

It was not clear if Fernandes and his partners had been formally asked by the lenders to immediately provide more cash.   Continued...

 
An AirAsia baggage handler drops a bag on the tarmac at Kuala Lumpur International Airport in Sepang, Malaysia, June 17, 2015. REUTERS/Olivia Harris