Updated MAS suspended ahead of fund raising plan

KUALA LUMPUR: Trading of shares of MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) was suspended from 9am to 5pm today pending an announcement of a fund raising exercise.

The national carrier said today that Bursa Malaysia Securities Bhd had approved the company's request for a suspension in the trading of its securities.

The suspension is pending the announcement of "material transactions, which involve a fund raising exercise and a related-party transaction where the percentage ratio is equal to or exceeds 25%".

ECM LIbra Investment Research said the fund raising exercise did not come as a surprise considering that MAS had seen its cash pile of RM4.7 billion as of Dec 31, 2008, dwindle to just RM2.4 billion as of Sept 30, mainly due to outlays for settlements of expired derivatives as well as premiums for the restructuring of derivatives.

"On a net cash basis, it has fallen from RM3.2 billion to RM700 million over the same period. At the present cash burn rate, MAS’ cash pile could be depleted by mid 2010. As such, fund raising, whether debt and/or equity, is necessary in order to shore up its balance sheet.

"Furthermore, MAS also has large financial commitments going forward. It has placed a firm order for 35 Boeing 737-800 with an option for another 20 aircraft in early 2008. The total cost of the 55 aircraft is US$4.2 billion [RM14.3 billion] at list prices. Delivery of the aircraft will commence from 2010. MAS will also take delivery of six A380-800 in 2011," the research house said.