AirAsia Weighs BNP, Credit Suisse, RHB for Leasing Unit Sale

  • Discount carrier to sell shares in Philippine affiliate: CEO
  • AirAsia’s total debt stood at $2.7 billion on March 31

AirAsia Bhd. is considering hiring BNP Paribas SA, Credit Suisse Group AG and RHB Capital Bhd. to help sell its aircraft leasing unit as part of plans to raise funds and strengthen its finances, the group’s Chief Executive Officer Tony Fernandes said.

Asia’s biggest discount carrier also plans to garner between $75 million and $100 million from a sale of new shares in its Philippine arm, Fernandes said in an interview in his office in Sepang, near Kuala Lumpur. Besides the existing shareholders, “three other parties are also interested” in Philippines AirAsia and the carrier will mandate banks for the sale in two or three weeks, he said.

“The Philippine operation is doing well and has strong growth potential,” he said.

A potential deal involving the sale of the leasing unit, Asia Aviation Capital Ltd., would again highlight the popularity of a lucrative industry that has lured billionaires including Li Ka-shing and Cheng Yu-tung. As airlines in Asia-Pacific move to triple their fleet, they are finding it cheaper to lease jets rather than own them, with returns from multiyear contracts exceeding those of airlines.

“The shortlisting of bankers for the leasing unit sale and the plan to raise funds for the Philippines show the management’s commitment to beef up the company’s balance sheet,” said Ang Kok Heng, Kuala Lumpur-based chief investment officer at Phillip Capital Management Bhd., which oversees $544 million. “That’s positive for the company.”

Among 22 analysts tracking AirAsia shares, none recommend selling the stock, according to data compiled by Bloomberg. Seventeen advise buying the shares and five suggest holding.

Shares Climb

AirAsia shares rose 4.3 percent to 2.64 ringgit in Kuala Lumpur, the biggest gain in more than a week. The stock has doubled this year, compared with a 3.2 percent decline for the FTSE Bursa Malaysia KLCI Index.

RHB said in an e-mail that it hasn’t yet received any official mandate for the said transaction. BNP Paribas declined to comment, while Credit Suisse didn’t respond to an e-mail seeking comment.

In a separate interview last month, Fernandes said the carrier had received an offer valued at about $1 billion for the leasing business and the company needed to further discuss it with the board. AirAsia intends to divest the fully owned unit at some point, he said.

Rival Lessor

BOC Aviation Ltd., the leasing arm of China’s fourth-biggest lender by market value, last month raised $1.1 billion from an initial public offering, attracting investors including Boeing Co., China Investment Corp., the Silk Road Fund and Oman Investment Fund.

AirAsia, which had total debt of 10.9 billion ringgit ($2.7 billion) as of March 31, has to pay for five aircraft that it is taking delivery of this year. Fernandes and his business partner Kamarudin Meranun recently subscribed to new shares worth about 1 billion ringgit in the Malaysian carrier.

AirAsia, one of the biggest customers of Airbus Group SE’s single-aisle A320 jets, set up Asia Aviation Capital in 2014. The carrier operated 171 A320s in its fleet at the end of March.

The group’s medium- and long-haul budget carrier, AirAsia X Bhd., had 29 A330s. Asia Aviation Capital manages only those group aircraft leased to affiliates outside Malaysia, including Thai AirAsia Co., PT Indonesia AirAsia and AirAsia India Pvt., according to filings in 2014.

Philippines AirAsia is a joint venture between AirAsia and some Filipino investors, according to information published on its website. The unit operates domestic and international flights out of Manila and the beach resort destinations of Cebu and Kalibo.

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