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Khazanah outlines MAS restructuring plan

Khazanah Nasional has released a 12-point restructuring plan aimed at bringing Malaysia Airlines (MAS) back from the brink of collapse and returning it to profitability.

At the core of its plan is to delist the flag carrier and create a new company with a competitive operational structure and workforce. This will be done through staggered injections of MYR6 billion ($976.7 million) from the majority shareholder over a three-year period.

The Malaysian sovereign wealth fund says it is targeting to delist MAS by end 2014 and to migrate the relevant operations, assets and liabilities to the new company by 1 July 2015.

During this period, group chief executive Ahmad Jauhari Yahya will continue to lead the old MAS, as will the board. Khazanah has meanwhile started the search for a new chief executive, expected to be announced by the end of the year.

Khazanah’s target is for the new company, which will have a “significantly corrected” cost and operational structure and workforce, to return to profitability within three years of being taken off Bursa Malaysia. Thereafter, it has plans to relist the carrier between 2017 and 2019.

If such conditions are met, Khazanah would also consider a sell-down or partial sell-down of its stake to appropriate strategic buyers from the private sector.

To fund the restructuring plan, Khazanah will disburse investments amounting to MYR6 billion periodically.

Delisting MAS is expected to cost some MYR1.4 billion, while restructuring and retrenchment costs will require another MYR1.6 billion.

Over a three-year period starting 2014, MYR3 billion will also be progressively injected into the new MAS on a milestone basis.

Part of the restructuring plan also involves bringing down the carrier’s net gearing from the current 290% to 100-125%, through inter alia, debt-to-equity swaps.

“The combination of measures announced today will enable our national airline to be revived” says Khazanah's managing director Azman Hj. Mokhtar.“While funds have been made available, they come with strict conditions, so as to ensure that MAS truly resets its business model and cost structures, in order to be truly sustainable.”

The restructuring plan comes a day after MAS revealed a pre-tax loss of MYR303 million for its fiscal second quarter ended 30 June. The flag carrier has suffered years of losses in the face of stiff competition and this year experienced two of the greatest air disasters in aviation history: the mysterious disappearance of MH370 on 8 March and the shoot down of MH17 over Eastern Ukraine on 17 July.

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