With the support of a $150 million investment from private equity firm PAG Asia Capital, Regional Express Holdings (ASX: REX) is hoping to resume domestic flights between its major cities network by March 2021 after operations were decimated by pandemic travel restrictions.
Exclusive negotiations are underway, but the proposed funding would be an investment in senior secured convertible notes which could be converted at $1.50 per share.
Under the proposed scheme, if the first $50m tranche were to be converted, PAG would hold approximately 23% equity in Rex and if the full $150m were to be converted, PAG would hold approximately 48% of Rex’s issued shares.
“I am encouraged by the progress of Rex’s negotiations to date with an investor of PAG’s reputation and experience,” said Rex Executive Chairman, Lim Kim Hai.
“With PAG’s support, I have every reason to believe that Rex can successfully launch its domestic major city jet operations.”
“As a well-established carrier with an impeccable track record, I am confident that Rex will deliver to Australians an alternative major city domestic service that is safe, reliable and affordable.”
Although such an investment into Rex is subject to the Foreign Investment Review Board, Rex is hoping to release long-form documentation regarding the convertible notes prior to the Company’s AGM, which is tentatively scheduled for early-December where Rex will seek shareholder approval.
Upon completion of the convertible note funding, PAG will be entitled to nominate two Directors to join the Regional Express board with the private equity firm operating nine offices around the world, including Australia, and employs more than 200 staff.
Prior to the onset of COVID-19, Regional Express operated a fleet of 60 Saab 340 aircrafts across 59 domestic destinations, specifically servicing the regional cities that are crucial business regions to Australia’s economy but are not serviced by major airlines.
With the travel industry reeling across airlines, tourism and hospitality operators, Rex reported a $19.4m loss after tax for FY20 having logged a $62m impairment in anticipation of difficult trading conditions in the next two years.
Since coming out of a trading halt for the release of their negotiations with PAG, REX shares reach an intra-day high of $1.15 which represented an 5.5% rise on their previous $1.09 close.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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