RHB INVESTMENT BANK BERHAD Joint Financial Advisers AIRASIA GROUP BERHAD ...

272 Pages·2017·2.92 MB·English

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I nformation relating to Herondell Disposal (as defined in this Circular) has been included in this Circular for information purposes
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AIRASIA GROUP BERH A D
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CIRCULAR TO S H AREHOLDERS
CIRCULAR TO S HAREHOLDERS
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IN RELATIO N TO THE
IN RELATI O N TO THE
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PROPO SED DISPOSAL OF OUR AIRCRAFT LEASING OPERATIONS THAT INCLUDES THE
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PROPOSED OPTION (AS DEFINED IN THIS CIRCULAR)
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NOTICE OF EXTRAORDIN ARY GENERAL MEETING
NOTICE OF EXTRAORDIN A RY GENERAL MEETING
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Principal Adviser and Joint Financial Advisers
Principal Adviser and Joint Financial Advisers
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Joint Financial Advisers
Joint Financial Advisers
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The notice of EGM together w i t h the Proxy Form is enclosed in this Circular. Our forthcoming EGM will be held as follows:
The notice of EGM together with the Proxy Form is enclosed in this Circular. Our forthcoming EGM will be held as follows:
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Date and time : Monday, 14 May 2018 at 10.00 a.m., or any adjournment thereof
Date and time : Monday, 14 May 2018 at 10.00 a.m., or any adjournment thereof
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Venue : CAE Kuala Lumpur Sdn. Bhd. (formerly known as Asian Aviation Centre of
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Lumpur International Airport, 64000 Sepang, Selangor Darul Ehsan, Malaysia
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Details of lodging the Proxy Form:
Details of lodging the Proxy Form:
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Last date and time for lodgment : Saturday, 12 May 2018 at 10.00 a.m., or any adjournment thereof
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To be deposited at our registered office : Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar
To be deposited at our registered office : SSUoonuuittt hh3,, 0NN-0oo1.. ,88 ,,L JJeaavllaaennl 3KK0ee, rriiTnnoccwhhiie,, r55 99A22, 00V00 eKKrtuuicaaallaal LLBuuummsinppeuusrrs,, MMSuaailltaaeyy, ssAiiaav enue 3, Bangsar
TToTo bo be b ede de dpeepoposoistsietideted ad ta ato tou ouru rr rer greegisgitsiestreteerdreed od of offiffcifecice e : : : USUnUonituni tti3 ht 30,3 0-N00-0-1o01,. 1,8L ,, Le LJveaevelvlae enl3 l 30K30, e0,T r, iTonTowcowhewire, e r5A r9 A,A2 ,V 0, V0eV reKteritrcuitaciaclal aalB l L BuBuusuimsnsinepinseuessr ss,S s M SuSuiatuieltia,et ye,A s, AivAave vneenunueu e3e 3, 3,B , BaBnaangngsgassra ar r
South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia
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The lodging of the Proxy Form will not preclude you from attending and voting in person at our forthcoming EGM should you
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TThhiiss CCiirrccuullaarr iiss ddaa tteedd 2277 AApprriill 22001188
This Circular is d a t ed 27 April 2018
This Circular is dated 27 April 2018
TThThihsi siCs C iCricrircuculualalra rir s i sids d adataetetded d2 2 7 27 7A A Apprpirlri li2 l2 0 20101818 8
DEFINITIONS

For the purpose of this Circular, except when the context otherwise requires, the following definitions shall apply:

AAB : AirAsia Berhad, a wholly-owned subsidiary of our Company

AAB Internal Reorganisation : The internal reorganisation by way of a scheme of arrangement among our
Company, AAB and AAB’s then shareholders under Section 366 of the Act
comprising the following:

(i) the exchange of the entire issued share capital of AAB with AAGB
Shares on the basis of 1 AAGB Share for every 1 AAB share held by
AAB’s then shareholders on 6 April 2018; and

(ii) the assumption of the listing status of AAB by our Company and the
admission of our Company to and withdrawal of AAB from the Official
List of Bursa Securities, with the listing of and quotation for all the issued
shares of our Company on the Main Market of Bursa Securities

AACL : Asia Aviation Capital Limited, a wholly-owned indirect subsidiary of our
Company and incorporated in Labuan, Malaysia under the Labuan Companies
Act, 1990

AAGB Group or Group : For the purpose of this Circular, collectively, our Company, our subsidiaries and
our consolidated Affiliate Airlines, namely PT. Indonesia AirAsia and Philippines
AirAsia Inc.

AAGB or Company : AirAsia Group Berhad

AAGB Share or Share : Ordinary share of our Company

Act : Companies Act, 2016, as amended from time to time and any re-enactment thereof

Affiliate Airlines : Any airline in respect of which our Company:

(i) has direct or indirect ownership or control and “control” for this purpose
means the power to direct the management and policies of such airline
whether through the ownership of voting capital, by contract or
otherwise; or

(ii) owns directly more than 30% of the voting capital; or holds more than
30% of the directors’ voting rights; or by contractual arrangement is
entitled to exercise more than 30% of the voting capital or directors’
voting rights,

and such airline is engaged as its primary business as a scheduled airline primarily
involved in the carriage of passengers. Without prejudice to the requirement that
paragraph (i) or paragraph (ii) above must be satisfied at the relevant time, as of 28
February 2018, it is acknowledged that the following entities satisfy the above
requirements: AirAsia X Berhad, Thai AirAsia X Co., Ltd., Thai AirAsia Co., Ltd.,
PT. Indonesia AirAsia, PT Indonesia AirAsia Extra, AirAsia (India) Limited,
AirAsia Japan Co., Ltd., Philippines AirAsia Inc. and AirAsia, Inc.

Airbus : Airbus S.A.S

Aircraft Assets : Collectively, 84 aircraft and 14 aircraft engines which are part of the subject matter
of the Proposed Disposals

Base Purchase Price : Collectively, the Herondell Base Purchase Price, Incline B Base Purchase Price
and Fly Base Purchase Price
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DEFINITIONS (CONT’D)

BBAM : BBAM Limited Partnership

BNP PARIBAS : BNP PARIBAS (acting through its Singapore Branch and BNP PARIBAS Capital
(Malaysia) Sdn Bhd)

Board : Board of directors

Bursa Securities : Bursa Malaysia Securities Berhad

Capital Commitment To : Indicative committed investment of USD50.0 million (approximately RM196.1
Incline Funds million) into Incline Funds, of which:

(i) the initial committed investment of approximately USD15.0 million
(approximately RM58.8 million) is to be invested by AACL or its nominee
into the Incline B Parallel on or before the initial transfer of the Incline B
Aircraft Assets. Such committed investment (being in-kind disposal
consideration for the Proposed Disposal To Incline B) is to be net settled
against the Incline B Disposal Consideration; and

(ii) the remaining committed investment of approximately USD35.0 million
(approximately RM137.3 million) remains as a capital commitment by
AACL or its nominee which is to be progressively invested by it into the
Incline Funds as and when such capital is called by either the managing
member of Incline A LLC under Incline A or the general partner of Incline
B Parallel in future, of which the breakdown of the quantum to be invested
cannot be ascertained as yet

Circular : This Circular in relation to the Proposed Disposals dated 27 April 2018

Credit Suisse : Credit Suisse (Singapore) Limited

Disposal Consideration : The aggregate consideration amount of USD1,185.0 million (approximately
RM4,647.0 million), being the summation amount of the Herondell Disposal
Consideration, Incline B Disposal Consideration and Fly Disposal Consideration
for the Proposed Disposals

Disposal SPAs : Collectively, the Herondell SPA, Incline B SPA and FLY SPA

Disposal Subsidiaries : Collectively, Red 1, Red 2, Red 3 and Red 4

EGM : Extraordinary general meeting

EPS : Earnings per AAGB Share

EV : Enterprise value

FLY : Fly Leasing Limited

Fly Aircraft Assets : 33 aircraft and 7 aircraft engines to be transferred under the FLY SPA

Fly Aladdin : Fly Aladdin Holdings Limited

Fly Base Purchase Price : The aggregate consideration payable, equivalent to EV, by Fly Aladdin of
USD1,069.6 million (approximately RM4,194.4 million) under the Proposed
Disposal To FLY, subject to adjustments pursuant to the FLY SPA as set out in
Appendix II(D) of this Circular

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DEFINITIONS (CONT’D)

Fly Disposal Consideration : The amount of USD453.3 million (approximately RM1,777.6 million), computed
based on Fly Base Purchase Price minus the applicable debt financings amount for
the Fly Aircraft Assets, payable by Fly Aladdin to AACL under the Proposed
Disposal To FLY

FLY Equity : Up to 3,333,333 FLY Depositary Shares to be issued at an issue price of USD15.0
each (approximately RM58.8) to AACL, totaling approximately USD50.0 million
(approximately RM196.1 million), being in-kind disposal consideration for the
Proposed Disposal To FLY

FLY Equity Subscription : Proposed subscription agreement to be entered into among AAB, AACL and FLY
Agreement on or before the initial transfer of Fly Aircraft Assets for the issuance and sale of
FLY Equity at an issue price of USD15.0 (approximately RM58.8) each to AACL

FLY Option Agreement : Aircraft sale and purchase option agreement effective 28 February 2018 entered into
among AAB, AACL and Fly Aladdin for the Proposed Option

FLY Depositary Shares : FLY’s American Depositary Shares (which are quoted on the NYSE), each
representing an ownership interest in 1 FLY’s common share

FLY SPA : Share purchase agreement dated 28 February 2018 entered into among AAB,
AACL, Fly Aladdin and FLY for the Proposed Disposal To FLY

FLY SPA For Future : Aircraft sale and purchase agreement dated 28 February 2018 entered into among
Aircraft AAB, AACL and Fly Aladdin for the Proposed Future Disposal To FLY

FPE : Financial period ending or ended, as the case may be

Future Aircraft : Up to 98 aircraft to be delivered in the future to AACL pursuant to the Future
Aircraft Agreements

Future Aircraft Agreements : Collectively, Incline B SPA For Future Aircraft, FLY SPA For Future Aircraft and
Option Agreements

FYE : Financial year ending or ended, as the case may be

Herondell : Herondell Limited

Herondell Aircraft : 13 aircraft transferred or to be transferred under the Herondell SPA

Herondell Base Purchase : The aggregate consideration payable, equivalent to EV, by Herondell of USD527.8
Price million (approximately RM2,069.8 million) under the Herondell Disposal, subject
to adjustments pursuant to the Herondell SPA as set out in Appendix II(A) of this
Circular

Herondell Disposal : Disposal by AACL of its entire equity interest in Red 1 and up to 4 aircraft to
Herondell or its nominee for the Herondell Disposal Consideration which does not
require your approval

Herondell Disposal : The amount of USD183.2 million (approximately RM718.4 million), computed
Consideration based on Herondell Base Purchase Price minus the applicable debt financings
amount for Herondell Aircraft, payable by Herondell to AACL under the Herondell
Disposal

Herondell SPA : Share and aircraft purchase agreement dated 28 February 2018 entered into among
AAB, AACL, Herondell and NBB for the Herondell Disposal

Incline A : Incline A Aviation Limited Partnership, a private investment fund

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DEFINITIONS (CONT’D)

Incline A GP (Cayman) : Incline A GP (Cayman) Co., Ltd., being the managing member of Incline A LLC
and general partner of Incline A

Incline A LLC : Incline A Aviation LLC, being one of the partners of Incline A, which invests
substantially all of its assets in Incline A

Incline A Subscription : Proposed letter agreement to be entered into among AAB, AACL or its nominee
Agreement as investor and Incline A GP (Cayman) on or before the initial transfer of Incline B
Aircraft Assets for the purchase of membership interests in Incline A LLC by
AACL or its nominee and the Capital Commitment To Incline Funds in respect of
Incline A LLC, including such other ancillary document(s) (if any) to be executed
in connection with our investment into Incline A LLC

Incline Aladdin : Incline Aladdin Holdings Limited

Incline B : Incline B Aviation Limited Partnership, a private investment fund

Incline B Aircraft Assets : 38 aircraft and 7 aircraft engines to be transferred under the Incline B SPA

Incline B Base Purchase : The aggregate consideration payable, equivalent to EV, by Incline Aladdin of
Price USD1,248.8 million (approximately RM4,897.2 million) under the Proposed
Disposal To Incline B, subject to adjustments pursuant to Incline B SPA as set out
in Appendix II(B) of this Circular

Incline B Disposal : The amount of USD548.5 million (approximately RM2,150.9 million), computed
Consideration based on Incline B Base Purchase Price minus the applicable debt financings
amount for Incline B Aircraft Assets, payable by Incline Aladdin to AACL under
the Proposed Disposal To Incline B

Incline B GP (Cayman) : Incline B GP (Cayman) Co., Ltd., being the general partner of Incline B and the
intended general partner of Incline B Parallel

Incline B Parallel : Incline B Aviation Parallel Limited Partnership, a parallel fund to be formed by
Incline B GP (Cayman)

Incline B Parallel : Proposed letter agreement to be entered into among AAB, AACL or its nominee
Subscription Agreement as investor and Incline B GP (Cayman) on or before the initial transfer of Incline B
Aircraft Assets for the purchase of limited partnership interests in Incline B Parallel
by AACL or its nominee and the Capital Commitment To Incline Funds in respect
of Incline B Parallel, including such other ancillary document(s) (if any) to be
executed in connection with our investment into Incline B Parallel

Incline B SPA : Share purchase agreement dated 28 February 2018 entered into among AAB,
AACL, Incline Aladdin and Incline B for the Proposed Disposal To Incline B

Incline B SPA For Future : Aircraft sale and purchase agreement dated 28 February 2018 entered into among
Aircraft AAB, AACL and Incline Aladdin for the Proposed Future Disposal To Incline B

Incline Funds : Collectively, Incline A LLC and Incline B Parallel

Incline Funds Investment : Collectively, Incline A Subscription Agreement and Incline B Parallel Subscription
Agreements Agreement

Incline Option Agreement : Aircraft sale and purchase option agreement effective 28 February 2018 entered
into among AAB, AACL and Incline Aladdin for the Proposed Option

Joint Financial Advisers : Collectively, RHB Investment Bank, BNP PARIBAS and Credit Suisse

Listing Requirements : Main Market Listing Requirements of Bursa Securities

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DEFINITIONS (CONT’D)

Lock-Up Period : The lock-up period from the date of the first issuance of FLY Equity to AACL until
the Lock-Up Period End Date

Lock-Up Period End Date : The date of the delivery of the final aircraft under the Incline B SPA For Future
Aircraft and the FLY SPA For Future Aircraft, whichever is later

LPD : 2 April 2018, being the latest practicable date before the printing of this Circular

NA : Net assets

NBB : Nomura Babcock & Brown Co., Ltd.

NBV : Net book value

NYSE : New York Stock Exchange

Option Agreements : Collectively, FLY Option Agreement and Incline Option Agreement

Proposed Disposals : Collectively, the Proposed Disposal To Incline B, Proposed Disposal To FLY and
the Herondell Disposal

Proposed Disposal To FLY : Proposed disposal by AACL of its entire equity interest in Red 3, Red 4, 1 aircraft
and 7 aircraft engines to Fly Aladdin or its nominee for the Fly Disposal
Consideration

Proposed Disposal To : Proposed disposal by AACL of its entire equity interest in Red 2, 3 aircraft and 7
Incline B aircraft engines to Incline Aladdin or its nominee for the Incline B Disposal
Consideration

Proposed Future Disposals : Collectively, Proposed Future Disposal To Incline B and Proposed Future Disposals
To FLY

Proposed Future Disposal : Proposed disposal by AACL of up to 27 aircraft to be delivered in the future to Fly
To FLY Aladdin for a disposal consideration to be agreed later among AAB, AACL and Fly
Aladdin

Proposed Future Disposal : Proposed disposal by AACL of up to 21 aircraft to be delivered in the future to
To Incline B Incline Aladdin for a disposal consideration to be agreed later among AAB, AACL
and Incline Aladdin

Proposed Option : Proposed option granted by AACL to Incline Aladdin and Fly Aladdin to
collectively purchase up to 50 aircraft to be delivered in the future for a purchase
consideration to be agreed among AAB, AACL, Incline Aladdin and Fly Aladdin

Red 1 : Red Aircraft Holdings 1 Co., Ltd., a wholly-owned direct subsidiary of AACL

Red 2 : Red Aircraft Holdings 2 Co., Ltd., a wholly-owned direct subsidiary of AACL

Red 3 : Red Aircraft Holdings 3 Co., Ltd., a wholly-owned direct subsidiary of AACL

Red 4 : Red Aircraft Holdings 4 Co., Ltd., a wholly-owned direct subsidiary of AACL

RHB Investment Bank : RHB Investment Bank Berhad

SEC : U.S. Securities and Exchange Commission

U.S. : United States of America

VWAP : Volume weighted average market price

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DEFINITIONS (CONT’D)

CURRENCIES

AUD or A$ : Australian Dollar

EUR or € : Euro

JPY or ¥ : Japanese Yen

MYR or RM : Ringgit Malaysia

USD or $ : United States Dollar

EXCHANGE RATES

Unless otherwise stated, the following exchange rate has been used in this Circular:

USD1.00 : RM3.9215 (being the middle rate quoted by Bank Negara Malaysia as at 5.00 p.m.
on 28 February 2018, which is the date of signing of the Disposal SPAs)

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PRESENTATION OF INFORMATION

References to “our Company”, “we”, “us”, “our” and “ourselves” in this Circular are to our Company. References to
“our Group” are to our Company, our subsidiaries, PT. Indonesia AirAsia and Philippines AirAsia Inc.. All references
to “you” and “your” in this Circular are to our shareholders.

Unless specifically referred to, words denoting the singular shall, if applicable, include the plural and vice versa and
words denoting the masculine gender shall, if applicable, include the feminine and/or neuter genders and vice versa.
References to persons shall include corporations, unless otherwise specified.

Any references in this Circular to the provisions of any enactment, statute, rules, regulation, rules of stock exchange or
guideline shall (when the context admits) be construed as a reference to the provisions of such enactment, statute, rules,
regulation, rules of stock exchange or guideline (as the case may be) as modified by any written law or (if applicable)
amendments to the enactment, statute, rules, regulation, rules of stock exchange or guideline for the time being in force.

Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise stated.

Certain amounts and percentage figures included herein have been subject to rounding adjustments. Any discrepancies
in the tables included in this Circular between the amounts listed, actual figures and the totals thereof, are due to rounding.

Certain statements in this Circular may be forward-looking in nature, which are subject to uncertainties and
contingencies. Forward-looking statements may contain estimates and assumptions made by our Board after due inquiry,
which are nevertheless subject to known or unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements to differ materially from anticipated results, performance or achievements
expressed or implied in such forward-looking statements. Hence, the inclusion of a forward-looking statement in this
Circular should not be regarded as a representation or warranty that our Company’s plans and objectives will be
achieved.

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TABLE OF CONTENTS

LETTER TO OUR SHAREHOLDERS CONTAINING: Page
1. INTRODUCTION ......................................................................................................................................................... 1
2. DETAILS OF THE PROPOSED DISPOSALS ......................................................................................................... 3
3. RATIONALE AND BENEFITS OF THE PROPOSED DISPOSALS, PROPOSED FUTURE DISPOSALS
AND PROPOSED OPTION....................................................................................................................................... 21
4. RISK FACTORS ......................................................................................................................................................... 22
5. INDUSTRY REVIEW AND FUTURE PROSPECTS ............................................................................................ 25
6. EFFECTS OF THE PROPOSED DISPOSALS ....................................................................................................... 27
7. CASH COMPANY OR PN17 COMPANY ............................................................................................................. 31
8. APPROVALS REQUIRED AND CONDITIONALITY ........................................................................................ 31
9. TENTATIVE TIMELINE FOR THE PROPOSED DISPOSALS .......................................................................... 32
10. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED ................. 32
11. OUTSTANDING CORPORATE PROPOSALS ANNOUNCED BUT PENDING COMPLETION ................ 32
12. DIRECTORS’ RECOMMENDATION .................................................................................................................... 33
13. EGM .............................................................................................................................................................................. 33
14. FURTHER INFORMATION ..................................................................................................................................... 34

APPENDICES
I. CORPORATE STURCTURE OF OUR GROUP BEFORE AND AFTER THE PROPOSED DISPOSALS .. 35
II. INFORMATION ON THE FOLLOWING AGREEMENTS AND PROPOSED AGREEMENTS:
(A) SALIENT TERMS OF THE HERONDELL SPA ....................................................................................... 37
(B) SALIENT TERMS OF THE INCLINE B SPA ............................................................................................ 42
(C) PROPOSED SALIENT TERMS OF THE INCLINE FUNDS INVESTMENT AGREEMENTS ......... 47
(D) SALIENT TERMS OF THE FLY SPA ......................................................................................................... 51
(E) PROPOSED SALIENT TERMS OF THE FLY EQUITY SUBSCRIPTION AGREEMENT ................ 57
(F) SALIENT TERMS OF THE FUTURE AIRCRAFT AGREEMENTS .................................................... 61
III. SALIENT FEATURES OF INVESTMENT IN THE INCLINE FUNDS ............................................................. 68
IV. INFORMATION ON THE AIRCRAFT ASSETS AND FUTURE AIRCRAFT ................................................. 71
V. INFORMATION ON THE FOLLOWING ENTITIES:
(A) INFORMATION ON THE INCLINE FUNDS ............................................................................................ 73
(B) INFORMATION ON FLY ............................................................................................................................. 75
VI. INFORMATION ON DISPOSAL SUBSIDIARIES ............................................................................................... 86
VII. OUR PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2017 TOGETHER WITH THE REPORTING ACCOUNTANTS’ LETTER THEREON ................................ 90
VIII. ANNUAL REPORT OF FLY FOR THE FYE 31 DECEMBER 2017 ................................................................114
IX. FURTHER INFORMATION ...................................................................................................................................250

NOTICE OF EGM .......................................................................................................................................... ENCLOSED

FORM OF PROXY ......................................................................................................................................... ENCLOSED
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AIRASIA GROUP BERHAD
(Company No. 1244493-V)
(Incorporated in Malaysia)

Registered office:

Unit 30-01, Level 30
Tower A, Vertical Business Suite
Avenue 3, Bangsar South
No. 8, Jalan Kerinchi
59200 Kuala Lumpur
Malaysia

27 April 2018

Board of Directors:
Datuk Kamarudin bin Meranun (Non-Independent Executive Chairman)
Tan Sri (Dr.) Anthony Francis Fernandes (Non-Independent Executive Director and Group Chief
Executive Officer)
Dato’ Abdel Aziz @ Abdul Aziz bin Abu Bakar (Non-Independent Non-Executive Director)
Dato’ Fam Lee Ee (Senior Independent Non-Executive Director)
Dato’ Mohamed Khadar bin Merican (Independent Non-Executive Director)
Stuart L Dean (Independent Non-Executive Director)
Noor Neelofa binti Mohd Noor (Independent Non-Executive Director)

To: Our shareholders

Dear Sir/Madam,

PROPOSED DISPOSALS

1. INTRODUCTION

On 29 August 2016, RHB Investment Bank, on behalf of AAB, has announced that the Board of AAB has
approved AAB to carry out a sale process for the purpose of divesting all or a substantial portion of its equity
interest in AACL or its business or assets. In this regard, AAB has appointed RHB Investment Bank, Credit
Suisse and BNP PARIBAS respectively as the Joint Financial Advisers for the potential divestment.

On 1 March 2018, RHB Investment Bank, had on behalf of AAB’s Board, announced that AAB proposes to
divest its aircraft leasing operations that are currently undertaken by AACL to entities managed by BBAM for
the Disposal Consideration of USD1,185.0 million (approximately RM4,647.0 million) and AACL have
accordingly entered into the following agreements on 28 February 2018:

No. Agreement Brief description No. of Aircraft Assets involved

(i) Herondell SPA Disposal by AACL of its entire equity interest in - 9 aircraft (via Red 1)
Red 1 and up to 4 aircraft to Herondell for a - 4 aircraft to be delivered to AACL
disposal consideration of USD183.2 million
(approximately RM718.4 million)
1

1