Capital A gets shareholders' nod for plan to uplift PN17 status

KUALA LUMPUR (May 7): Capital A Bhd (KL:CAPITALA) shareholders have given the green light to the company's regularisation plan following an extraordinary general meeting on Wednesday. This approval marks a significant step for Capital A to regularise its financial condition after being classified as a Practice Note 17 (PN17) company for over three years. The regularisation plan received overwhelming support, with 99.99% of shareholders, representing 43.67% of voting shares (1.89 billion shares), voting in favour of it. A small fraction, 0.0072% of shareholders holding 0.003% (137,100 shares), voted against the plan. Capital A, previously known as AirAsia Group Bhd, was classified as a PN17 company in January 2022 after its external auditors, Ernst & Young PLT, raised doubts about the airline's ability to continue as a going concern in its audited financial statements for the year ended Dec 31, 2019. This classification followed a drop in shareholders’ equity to below 50% of the group's share capital. The regularisation plan, submitted on Dec 23, 2024, is designed to address Capital A’s financial difficulties and restore investor confidence. Key components of the plan include a share capital reduction of up to RM6 billion to offset accumulated losses and a reorganisation of the group's business units. Once completed, Capital A intends to evolve beyond its low-cost airline roots into a broader aviation and digital services business. Last Friday, Capital A’s auditors, Ernst & Young, while giving an unqualified report on its 2024 accounts, again raised doubts about its ability to keep operating. The concern stemmed from uncertainties surrounding the completion of the proposed sale of its stakes in AirAsia Aviation Group Ltd (for RM3 billion) and AirAsia Bhd (for RM3.8 billion) to AirAsia X Bhd (KL:AAX). These deals are contingent upon approvals from government bodies, financiers, lenders, and other third parties, as well as AirAsia X successfully securing RM1 billion through a private placement. Ernst & Young cautioned that if these conditions are not met or waived in a timely manner, the sale agreements would become void. This could significantly hinder Capital A’s plan to reduce the liabilities of AirAsia Aviation Group and AirAsia by the end of 2025, potentially impacting the group's overall financial stability. In response, Capital A reassured investors that it would be able to complete the proposed regularisation and restructuring plan by June 2025. Outlining recent progress, it said AirAsia X’s RM1 billion private placement is nearing completion, with a sovereign wealth fund acting as the lead investor and confirmation from another investor. Additionally, approval from Thailand's Securities and Exchange Commission is anticipated by early May. Capital A also reported that it had secured approvals from the majority of its lenders, with the remaining two expected shortly. For the financial year ended Dec 31, 2024 (FY2024), Capital A reported an annual net loss of RM475.11 million, after it recorded a substantial quarterly loss of RM1.57 billion in the final quarter or 4QFY2024 — the largest quarterly loss since the Covid-19 pandemic — largely attributed to foreign exchange losses of RM1.4 billion. Full-year revenue from continuing operations, however, showed a positive trend, increasing by 16.98% to an all-time high of RM1.5 billion, compared with RM1.28 billion in FY2023 — when it recorded an annual net profit of RM255.32 million. At the close of trading on Wednesday, Capital A’s share price remained unchanged at 88 sen, giving the group a market valuation of RM3.82 billion. The stock has gained 31% from its one-year low of 67 sen in April. Read also: As AirAsia slides after falling into PN17, Fernandes assures the airline is working on plan to regularise its financial condition Auditors flag going concern risk, but Capital A stays confident in restructuring plan Capital A seeks Bursa Securities' approval to extend issuance of PN17 regularisation plan circular Capital A given until April 15 to issue shareholder circular on regularisation plan Forex loss drags Capital A into the red in FY2024, non-aviation revenue hits new record