Khazanah to pump in RM6 bil in MAS under recovery plan

29 Aug 2014 / 19:58 H.

    KUALA LUMPUR: Khazanah Nasional Bhd's latest recovery plan for troubled national carrier, Malaysian Airline Systems Bhd (MAS) will see another RM6 billion of public money pumped in over a period of three years, and about a third of its workforce slashed.
    At 3pm today, Khazanah announced the much-awaited "radical" restructuring of MAS via a 12-point recovery plan to return MAS to profitability within three years of its de-listing, expected by the end of this year.
    At the core of the plan is the creation of a new company to house the "new MAS", a new CEO to head the team, the much-awaited renegotiation of supply contracts.
    Under the plan, MAS will move its headquarters from Subang to Kuala Lumpur International Airport (KLIA).
    Current MAS CEO Ahmad Jauhari Yahya is expected to stay on at MAS at most until July 2015, when the restructuring of MAS is completed and the new company takes over operations.
    Khazanah group managing director Tan Sri Azman Mokhtar today announced that the search for a new CEO for the new company is on with Khazanah combing through both local and foreign candidates and expectation of nominating a CEO by the end of the year.

    A total restructuring and and investment funding of up to RM6 billion has been promised on a staggered basis, consisting of the amount of RM1.4 billion for the de-listing of MAS via the recently announced selective capital reduction exercise, RM1.6 billion set aside for restructuring and retrenchment cost and a progressive injection of RM3 billion into MAS.
    "Success is by no means guaranteed – while it is imperative that MAS as a critical enabler in national development is revived, public accountability for the use of the funds mean that it cannot be renewed at any cost. The plan also calls for all parties to close ranks and work together to enable the permanent reconstruction of our national icon," he added.
    Azman said that the plan does not include a break-up of MAS, which also has a maintenance, overhaul and repair arm as well as a cargo subsidiary.
    Khazanah also intends to reduce MAS net gearing (net debt over shareholders' funds) from 290% currently to a target range of 100% to 125% through, inter alia, debt-to-equity swaps.
    "In this regard we are pleased to announce that Kumpulan Wang Persaraan (Diperbadankan) (KWAP) has today agreed to swap a total of up to RM750 million of their existing Perpetual sukuk into ordinary equity, subject to a definitive agreement between the relevant parties," Azman said.
    He said once profitable, Khanah plans to relist MAS within three to five years, that is, between the end of 2017 and the end of 2019.
    "If such financial conditions are met, Khazanah will consider a sell-down or partial sell-down of its stake to appropriate strategic buyers from the private sector,"Azman told a packed room of journalists from all over the globe at its office today.
    A summary report of the plan entitled "Rebuilding a National Icon: The MAS Recovery Plan" was also released.
    A pertinent part of the plan is also for the government to enact a MAS Act to facilitate the restructuring in a comprehensive, timely and holistic manner.
    Azman also mentioned of the establishment of an "Aviation Commission" with regulatory capabilities to develop the aviation industry, which, in Khazanah's view, would benefit consumers and industry players.
    "An "Aviation Commission", if established, would bring Malaysia in line with international best practice, including with countries such as Australia, Ireland, the UK and the U.S," he said.
    Azman said Khazanah was leaving the details of the, what he called the "resetting of MAS' operating model", through a more regionally-focused networ, lower cost structure and greater emphasis on revenue yield management up to MAS management and board to iron out, not wanting to "micro manage".

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