Budget airline AirAsia has secured $443 million in private funding to help refurbish planes that were grounded during the pandemic, according to sources familiar with the deal.
The funding comes in two parts: $200 million from private credit funds Ares Management Corp. and Indies Capital Partners Pte. Ltd., specifically for getting the planes back in the air, and $243 million from aircraft lessors to refinance lease payments.
This deal highlights the growing trend of private credit in Asia, offering more competitive rates compared to traditional bank loans.
The financing is structured as privately-placed bonds tied to future airline ticket sales from AirAsia’s key routes. AirAsia’s financial advisor, Evercore Inc., and legal counsel A&O Shearman, along with lenders’ counsel Milbank LLP, played key roles in arranging this deal.
The private credit portion will pay a 11% interest rate annually with a four-year term, while the lessor portion offers a 7% rate with a two-year maturity. The deal is signed but not yet funded.
AirAsia has experience with private credit; earlier this year, its affiliate, Asia Digital Engineering, raised $100 million from OCP Asia Ltd. The airline is also planning to expand its routes to Europe and the West Coast of North America as part of its global growth strategy.
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