Sunday, September 20, 2009

AirAsia Falls Most in Six Weeks After Selling Shares

16 September 2009

AirAsia Bhd., Southeast Asia’s biggest discount carrier, fell the most in six weeks in Kuala Lumpur trading after selling shares at a discount in a private placement aimed at cutting debt.

The shares fell as much as 5 percent to 1.34 ringgit and traded at 1.35 ringgit as of 9:57 a.m. local time. It was the biggest intraday drop since Aug. 5.

AirAsia joins other Malaysian companies including Axiata Group Bhd. and Malayan Banking Bhd. in raising funds from stock sales this year amid a rebound in the FTSE Bursa Malaysia KLCI Index. AirAsia, whose shares have surged 55 percent this year, will use the proceeds to reduce its debt-to-equity ratio to 2.5 times from 3.7 times at the end of June, according to RHB Research Institute Sdn.

“With a much better capitalized balance sheet, AirAsia’s insolvency risk is substantially reduced,” Joshua Ng, an RHB analyst, wrote in a report today. RHB maintained an “underperform” rating on the stock “to reflect concerns on AirAsia’s still relatively high net gearing as well as the still tough operating conditions of the airline industry.”

The Sepang, Malaysia-based airline sold 380 million new shares at 1.33 ringgit apiece, raising 505.4 million ringgit, it said in a statement yesterday. The sale price is 5.7 percent lower than the previous close.

Airlines worldwide may lose a combined $11 billion in 2009, $2 billion wider than a previous forecast in June, as fuel costs rise and carriers earn less on fares and cargo, the International Air Transport Association said yesterday.

AirAsia has borrowed money to help pay for purchases after ordering as many as 175 planes from Airbus SAS, making the carrier the biggest customer for the planemaker’s single-aisle aircraft in Asia. The airline is expanding its fleet to add more routes to China and India as economic growth in the region spurs travel demand.

CIMB Investment Bank Bhd. and Credit Suisse (Singapore) Ltd. arranged the private placement, AirAsia said.

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