MAS airlines may need small rights issue for cash

MAS airlines may need small rights issue for cash

KUALA LUMPUR (AFP): Malaysia Airline System Bhd (MAS) could opt for a "small rights issue" to raise cash to part-finance purchase of 25 new Boeings due to arrive over the next five years as it expands its fleet.

MAS chairman Tajudin Ramli told Bernama news agency in an interview published yesterday that the national airline company was only short of 500 million ringgit (US$200 million) to finance the 10-billion-ringgit ($4 billion) expansion plan.

Tajudin, who in July dismissed the need for a rights issue, maintained that MAS still had "a very strong cash flow situation."

"We have already paid a certain amount for the 25 aircraft. What we need to do as we go along is to pay a small amount every year," said Tajudin, who controls 32 percent of the national airline company.

"The total amount is less than $4 billion. Over the next five years, our cash flow will be very strong and we are going to sell our old aircraft anyway," Tajudin added.

He said based on his calculations, MAS would only be short of 500 million ringgit. "And that is five years away."

"If we undertake a small rights issue, that would be more than sufficient to take care of that half a billion ringgit. I am not particularly worried about it," he asserted.

MAS has since July been trying to convince industry analysts that it will have no problems financing the fleet-expansion, after ordering in January 15 Boeing 777s and 10 747-400s, with an option for two Boeing 777s and three Boeing 747-400s, from The U.S. Boeing Commercial Airplane Group.

Analysts have doubted MAS's ability to pay for the purchase, given its present debts of over six billion ringgit.

"Our gearing ratio has come down to 1:6 from 1:8 previously and we are working to reduce it further," Tajudin said, adding that the company was continually seeking for the best ways to finance its capital requirements.

"This is an ongoing exercise. We are not quite happy with 1:6. In fact we want to bring it much lower," he said.

Tajudin also said MAS was still discussing with Boeing a plan to buy at least six Boeing super jumbo in order to be its launch customer.

Tajudin also revealed plans to forge additional strategic alliances with airlines in Europe and North America after having benefited from such and alliance with Virgin Atlantic of Britain and Ansett Airlines of Australia.

Speculation has been rife that Tajudin planned to divest his stakes in MAS. But Tajudin on Friday said the divestment had never crossed his mind at all.

"Otherwise, why should I spend so much time and effort doing what I am doing today," he had said.

MAS stock ended five sen lower at 6.45 ringgit on the local bourse Monday.