AirAsia Bhd and its wholly-owned unit, AirAsia Investment Ltd (AAIL), has executed multiple agreements to partially dispose of and subsequently convert its perpetual securities investments in PT Indonesia AirAsia (IAA) into new shares in PT Rimau Multi Putra Pratama TBK (RMPP).

Upon completion of the corporate exercise, RMPP, a company listed on the Indonesia Stock Exchange (IDX), will become the new holding company of IAA, whereby AAIL and its Indonesian partner, PT Fersindo Nusaperkasa (FNP), will become the major shareholders in RMPP.

AirAsia in a filing to Bursa Malaysia on Tuesday said the exercise involved four agreements -- Conditional Sale of Perpetual Capital Securities Agreement between AirAsia and AAIL, Conditional Sale of Perpetual Capital Securities Agreement between AirAsia and FNP, Pledge Agreement over Perpetual Capital Securities between AirAsia and FNP, and Conditional Standby Buyer Agreement between RMPP, AAIL and FNP.

It said the first agreement involved the sale of IAA's perpetual securities at the nominal value of IDR1.27 trillion (IDR100=RM0.032) to AAIL to subscribe in the rights issue of RMPP by way of in-kind contribution.

The second agreement involved the sale of IAA's perpetual securities at the nominal value of IDR1.32 trillion to FNP to subscribe in the rights issue of RMPP by way of in-kind contribution.

"FNP agrees to the repayment terms with a tenor of 10 years and six per cent interest rate per annum from the date of the agreement. Principal repayment is to be done annually with a grace period of 24 months and any unpaid principal or interest shall accrue over the period of the tenor with no penalty or additional default interest imposed," it said.

The third agreement, it said, involved the pledging of IAA's perpetual securities at nominal value of IDR1.32 trillion to secure the payment from FNP to AirAsia.

It said FNP was not be allowed to sell the IAA perpetual securities or RMPP shares within the first 24 months from the date of agreement, unless there be any withdrawal of the Indonesian law which designated that any foreign shareholders cannot hold more than the largest shareholder in an airline company in Indonesia.

If such circumstances occur and in the event of a sale by FNP, it said the cash generated by the sale shall be wholly applied to pay the past interest, past principal and the balance of the principal amount, in that order, and FNP should not receive any sales proceeds until the entire amount of the principal and interest have been fully settled.

"The pledge over IAA perpetual securities or RMPP shares remains so long as the payment for IAA-FNP perpetual securities remains subsisting and FNP shall refrain from declaring and paying out discretionary dividend or bonus," it said.

On the last agreement, AirAsia said RMPP would conduct a rights offering of up to 13.64 billion new rights shares at a nominal value of IDR250 per share on the basis of 23,818 new RMPP rights shares for every 377 existing RMPP shares held and FNP and AAIL was appointed as the standby purchasers to subscribe up to 10.404 billion rights issue shares.

"FNP and AAIL shall respectively satisfy the consideration by way of in-kind contribution," it said.

It added that upon completion of the rights issue, RMPP shall own a total amount of some IDR2.6 trillion perpetual securities to be converted into up to 241,067 of IAA newly issued common shares at a minimum nominal value of at least IDR10.78 million per IAA share and equivalent to up to 57.25 per cent equity interest in IAA.

On rationale, AirAsia said the exercise would support the financing needs of its growth ambition in Indonesia through the capital markets as it planned to grow IAA significantly with the vision to double the fleet size by 2020.

"The completion of the proposed transaction will provide IAA direct access to the equity and debt capital markets for future fund raising and provide AirAsia Group with the financial flexibility to pursue growth opportunities in the region and beyond," it said.

Additionally, it said the completion of the proposed transaction would increase the visibility of IAA and AirAsia Group as well as unlocking the value of IAA.

"This is expected to enhance the value for our shareholders when IAA becomes a direct subsidiary of RMPP. AirAsia's direct shareholdings in RMPP will be up to 48 per cent and effective shareholdings in IAA will be up to 48.43 per cent," it added.

- BERNAMA