AirAsia Bhd, a budget airline, has acquired $443 million in private finance to rehabilitate planes stranded due to the epidemic. Private credit funds Ares Management Corp. and Indies Capital Partners Pte Ltd., as well as aircraft lessors, provided the dual-tranche finance.
Ares Management Corp. and Indies Capital Partners provided a $200 million tranche specifically for the refurbishment of the grounded aircraft, allowing AirAsia to get these planes back into service. The remaining $243 million came from aircraft lessors to refinance existing lease liabilities. This move highlights the increasing popularity of private credit in Asia, which is quickly becoming a competitive alternative to traditional bank lending by offering higher, floating rates of return.
The financing deal is structured as privately placed bonds linked to future airline ticket sales from AirAsia’s key routes, providing security for the investors. AirAsia’s financial advisor for the transaction is Evercore Inc., with A&O Shearman serving as international counsel. Milbank LLP is representing the lenders.
In a four-year investment, the private credit part of the securitization belonging to AirAsia is a lucrative 11% annually, while in a two-year lease period, there is an option of a 7% interest rate applied. The agreement has been sealed but disbursement is still pending.
This transaction is part of AirAsia’s broader strategy to leverage private credit markets. Earlier, in 2023, AirAsia’s engineering and maintenance affiliate, Asia Digital Engineering Sdn. Bhd., raised $100 million from OCP Asia Ltd. The airline is also eyeing expansion of its medium to long-haul network to Europe and North America’s West Coast, underscoring its ambition to grow globally in the coming years.
The terms of the financing deal have evolved since initial discussions began in the second half of 2023, following negotiations between the parties involved. AirAsia confirmed the deal is in progress, while the lenders and advisors have not commented publicly on the transaction.
