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FT: Malaysia government buys MAS assets
By Douglas Wong
8/1/2002 9:29 am Tue
By Douglas Wong in Singapore
Published: January 7 2002
Malaysia Airline Systems, the national airline, on Monday
announced some M$6bn (US$1.6bn) worth of asset sales to help
repay M$7.8bn in debt and provide working capital.
The government, which last year bought 29.1 per cent of the
loss-making carrier for M$1.79bn, will pay M$2.2bn for several MAS
properties, M$400m above their book value.
MAS will also sell eight aircraft to the government or an international
funding agency for about M$4bn. It will lease back the properties
and the aircraft.
Mohd Nor Yusof, managing director, said: "With this, our balance
sheet will be more presentable for us to talk to bankers about
re-capitalising our business."
Of the proceeds, M$2.4bn would be used to take delivery of five
new aircraft, M$1.5bn to repay yen bonds due in May, and M$1.3bn
to repay short-term borrowings. The balance will be used for working
Besides the property and aircraft sales, which will be completed by
June, MAS also intends to sell its catering unit to a group led by
Lufthansa, the German airline.
However, Mr Mohd Nor provided no details of previously announced
plans to reduce the group's 21,000 workforce, and declined to say
when he thought MAS would be able to enter the "strategic
partnership" with a foreign airline.
He said that MAS was headed for a M$1.4bn loss for the year ended
March 2002, a fifth straight year of losses, but that it would return to
profitability by 2004. Mr Mohd Nor defended the role of the
government in the asset sales.
"There is a clear rationale for government involvement considering
the importance of aircraft travel," he said.
MAS will also reinstate some of the 12 routes it had previously
dropped due to cost concerns including Manchester, Karachi and
Malaysia's government last year moved to take over a number of
struggling companies weighed down by debt acquired before the
Asian crisis. Prime minister Mahathir Mohamad's economic adviser
and the former central bank governor Nor Mohamed Yakcop is
assisting in the MAS restructuring.
Analysts were generally positive about the announcement, which
introduces a timetable to address the carrier's most pressing
"But this is only the first step. MAS and other Malaysian companies
still have to show that they can introduce capable managements in
ever-more competitive businesses," said Hugh Peyman of Asian
consultants Research Works.
The announcement was made after the market closed. MAS shares,
which have fallen 12 per cent in the past 12 months, were
unchanged at M$3.16.