AirAsia Bhd has proposed to set up a sukuk mudharabah (certificates of equal value issued with the aim of using the contribution on the basis of partnership contracts via profit sharing mechanism) programme to raise up to 1 billion ringgit (S$391.5 million).
The low-cost carrier said in a filing with Bursa Malaysia that of the 1 billion ringgit, 550 million ringgit would be used to part-finance its capital expenditure and 300 million ringgit to refinance its banking facility.
AirAsia said it would use the proceeds, without limitation, to meet its syariah-compliant working capital requirements to support its business operations, administrative and operating expenses.
"These include meeting aircraft maintenance reserves and deposits for fuel hedging and fuel payment and other hedging activities."
It said the other hedging activities included but were not limited to foreign currency hedging and interest rate hedging.
"The activities undertaken are for supporting the business of AirAsia and not for the purpose of speculation. AirAsia shall endeavour to use syariah-compliant hedging instruments if they are available and competitive in the market," it added.
For the avoidance of doubt, the low-cost carrier added that the proceeds would exclude working capital requirements related to financial services or other businesses which were syariah non-compliant.
It added that the sukuk (Islamic bond) would be recognised as equity capital from an accounting perspective.
AirAsia said the programme was perpetual in tenure, whereby the carrier had a call option to redeem the sukuk mudharabah at the first call date at end of the fifth, seventh or 10th year.
It added that periodic distributions on the sukuk mudharabah could be deferred (in part or in full) at AirAsia's option, where the deferred periodic distributions were cumulative and not compounding.
The sukuk would be issued under the syariah principle of mudharabah (professional profit sharing partnership), said AirAsia, adding that the sukuk would not be rated.
"Payment obligations on the sukuk mudharabah will, at all times, rank ahead of other share capital instruments or security for the time being outstanding, but junior to the claims of all other present and future creditors of AirAsia (other than obligations ranking pari passu with the sukuk mudharabah)," it said.
The low-cost carrier said it had mandated AmInvestment Bank Bhd to be the sole principal adviser, lead arranger, lead manager and facility agent.