Malaysia Aviation Group Successfully Completes Recapitalisation

KLIA, 22 February 2021: Malaysia Aviation Group (“MAG”) is pleased to announce that the High Court of Justice of England and Wales has sanctioned a Scheme of Arrangement under Part 26 of the UK Companies Act 2006 between MAG’s leasing entity, MAB Leasing Limited, and the majority of MAG’s aircraft operating lessors on 22 February 2021. The Scheme received the unanimous support of the relevant lessors and represents an important component of MAG’s wider restructuring exercise which will achieve a reduction in MAG’s liabilities of over RM15 billion.

This financial restructuring exercise, which is expected to complete in early March 2021, involves all of MAG’s key stakeholders and, in addition to the Scheme, will see the airline successfully achieve bilateral agreements with finance lessors, spare engine lessors, maintenance service providers, corporate lenders, and Government of Malaysia-related entities. Now that the Scheme has been formally sanctioned by the UK court, the airline can proceed to implement its restructuring plan with the support of its sole shareholder, Khazanah Nasional Berhad (“Khazanah”) and existing stakeholders, ensuring the future of the flag carrier of Malaysia and providing essential connectivity to the nation.

Key elements of the restructuring are described below:

• Khazanah will be committing new capital of RM3.6b to MAG, to fund the business throughout the restructuring period until 2025.
• MAG itself has taken proactive steps to tide through the COVID-19 crisis through network cuts, structural cost savings, cash conservation and payment deferral initiatives. This translated to a total of RM5.5 billion in 2020 and target of RM397 million for Q1 2021.
• Operating lessors have continued to support the airline with a reset of lease rates to market and deferrals; deferrals will also be implemented with finance and other lessors.
• Revolving Credit Facility (RCF) lenders and hedging counterparties agreed on a term-out of their facilities.
• Various concessions from entities related to the Government of Malaysia have been successfully agreed to enable a solvent recapitalization of Malaysia Airlines.

The conclusion of the legal process together with the holistic reset of the operating platform and balance sheet have paved the way for a more agile and lean future for the carrier, giving MAG room and ability to fulfil its enhanced Long-term Business Plan 2.0 and achieving its Vision 2025.

Group CEO of MAG, Izham Ismail said, “The longer-term vision of MAG is to establish itself as a leading global travel group. This signifies a paradigm shift in the way we prioritize the different business segments and subsidiaries in the Group’s portfolio. We seek to expand MAG’s involvement into other travel-related products and services beyond flights, which will go a long way in helping our customers complete their end-to-end travel experience. Our geographical advantage, award-winning solutions and services, plus signature Malaysian Hospitality will also help us in diversifying our revenue stream by minimising the need for us to rely on the heavily competitive air travel industry for survival.”

With the restructuring completed, MAG looks forward to engaging policy makers in ensuring a positive return on investment for all aviation industry players.

MAG also wishes to record its utmost appreciation to all creditors involved for all the constructive discussions and support given throughout the past five months, which have enabled the Group to conduct the restructuring exercise so expeditiously.