AirAsia Group has revealed plans to raise about MYR454.51 million ringgit (USD112.4 million) by issuing up to 668,394,816 new shares in a private placement, representing 20% of its existing share capital.

The rationale behind the move, the AirAsia (AK, Kuala Lumpur Int'l) parent explained in a bourse filing on January 21, is to strengthen the group’s financial position with a marginal increase in its net assets. The proposed measure would place the new shares with third-party investors to be identified later.

Barring any unforeseen circumstances, and subject to all of the required approvals being obtained, the proposed private placement may be implemented in tranches within six months of receiving the approvals, the group said.

The proceeds will be used for fuel hedging settlement, aircraft lease and maintenance payments, digital business development costs, marketing expenses, and general working capital expenses.

AirAsia Group’s revenue for the nine-month period ending September 30, 2020, plunged 70.1% to MYR2.61 billion (USD646 million) due to the Covid-19 pandemic, it reported in November, resulting in its fifth straight quarterly loss. It has been seeking to raise MYR2.5 billion (USD619 million) from loans and investors.

“The proposed private placement will not fully address the group’s current financial concerns as the estimated gross proceeds [...] would not be sufficient to meet its long-term cash-flow requirements,” the filing acknowledged.

“However, [it] will serve as an interim measure to address the immediate cash-flow requirements of the group whilst the management continues to explore other available options and/or corporate proposals to be undertaken with the intention to improve the group’s financial performance in the longer term.”

As with most private placements, the fundraising exercise is expected to result in shareholding dilution. According to the filing, the separate stakes held by controlling shareholders and co-founders Tony Fernandes and Kamarudin Meranun, which both currently stand at 30.69%, would each decline to 25.57%, while those held by Fernandes-Meranun vehicles Tune Live and Tune Air would decrease from 15.23% to 12.69% and from 15.45% to 12.88%, respectively.