Indonesia AirAsia plans bond sale to keep its operating permit

[JAKARTA] AirAsia Bhd's Indonesian unit plans to sell perpetual bonds to bolster its equity position by end-September to avoid having its operating license revoked.

The company plans to sell as many of the notes as needed to take its financial position out of negative equity, the unit's president director, Sunu Widyatmoko, said in Jakarta Wednesday. Negative equity means the value of a company's assets used to secure loans is less than its outstanding debt.

Indonesian regulators announced Wednesday that 12 airlines, including PT Indonesia AirAsia, are at risk of having their permits canceled if they don't have positive equity by Sept 30. Regulators will announce in October whether they'll revoke the licenses, Transport Minister Ignasius Jonan said.

"We will certainly achieve positive equity before the set deadline," Widyatmoko said before attending a meeting with the Transport Ministry. "We will sell perpetual bonds, which will be treated as equity in accounting terms." AirAsia, the carrier's Malaysian parent, set up a 1 billion ringgit (S$357 million) programme in October to sell Islamic debt with no set maturity. Widyatmoko didn't specify if the unit's bond sale would be part of that program.

Indonesia's government is seeking to improve aviation safety after a plane operated by Indonesia AirAsia crashed in December on route to Singapore from Surabaya, killing all 162 people on board.

The ministry extended a July 31 deadline for the at-risk airlines, while suspending six carriers that had too few planes, Mr Jonan said at a briefing Wednesday in Jakarta.

"Why don't we allow negative equity? Because it's risky for flight safety," Mr Jonan said. "If the airlines' financial situation isn't healthy, it could be dangerous." Lion Group's Batik Air, which also was under regulatory watch, no longer has negative equity after carrying out a debt swap, Mr Jonan said.

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