AirAsia Indonesia Mulls Share Sales, Liability Restructuring

Indonesian low-cost carrier AirAsia Indonesia is contemplating a number of measures to restructure its liabilities and potentially sell shares as it attempts to improve its deteriorating financial position. The carrier's shares have been suspended since early July following the release of its most recent financial statements, which revealed negative equity.

In a filing on Wednesday, the airline is reportedly evaluating the conversion of trade payables and lease liabilities owed to controlling entities or shareholders into perpetual instruments that would effectively be classified as equity. The company is also considering the possibility of a rights issue or a private placement to raise additional capital.

These recapitalization options are being explored amidst a significant funding squeeze at the parent company, AirAsia Group Bhd, which reported a record debt of US$4.1 billion at the end of June. The group's co-founder and adviser, Tony Fernandes, had previously announced that fresh capital would be injected into AirAsia Indonesia's Indonesian and Philippine operations, with new shareholders anticipated to join the affiliates.

However, AirAsia Indonesia has not yet decided on a particular course of action and is still assessing its funding requirements, the prevailing market conditions, and the viability of each option in consultation with its shareholders and external advisers. The measures under consideration are intended to strengthen the company's capital structure and help it comply with exchange requirements.