What’s Up? … dated Jan 2011
Be that as it may, the sale of the planes is just temporary relief as there is a lot more work to be done o turn it around.
First Transmile will need to address its balance sheet woes. Shareholders’ funds are in negative territory as the company had to write down its investments in the four MD-11s. To resolve this, it needs to further strengthen its profitability.
Second, after raising some RM208 million for the sale of the four planes, Transmile still has outstanding debts of over RM310 million.
The question is how soon it can straighten matters out, especially with its creditors, who seem to be growing impatient.
Transmile’s group MD said that the target is to resolve all its debts woes in 2011 and turn the company around as soon as possible. The next thing is to deal with the lenders, get a haircut and make the necessary proposals to them, and get the authorities to agree to its regularization plan.
How fast it can resolve the outstanding debts depends on how proactive the lenders are to its proposals.
Transmile stopped operating unprofitable routes flown by the MD-11 aircraft at the end of March 2009.
The question that remains is how Transmile plans to resolve the remaining RM310 million in debts and how much of a haircut its creditors will be willing to accept.
Another question is who will get paid first. Transmile currently owe over rm500 million in the form of convertible bonds and MTNs.
One of the MTN holders is the EPF, which maintains that it should be paid before anyone bit Transmile has disputed this on the grounds that there is no ranking when it comes to creditors.
The MTN holders were not able to wind up Transmile and its subsidiaries as the latter sought a restraining order from the court to stop the any proceedings by its creditors. The RC expires at the end of Jan 2011.
There is still a possibility that the MTN holders will pursue liquidation of the company as they would be able to recover part of the amount due from its asserts such as its properties and its Boeing 727 and 737 aircraft. If they do, it is unclear how much they would be able to get from the disposal of the remaining assets.
Transmile can still make some profits with its existing narrow body aircraft and other ancillary services. On top of that, the company is constantly looking for new business opportunities to enhance its revenue stream and improve profitability.
One lucrative domestic contract is flying parcels to East Malaysia for POS. The contract has been extended to 2015. It is understood that Transmile and Gading Aviation Sdn Bhd are the only two companies contracted by POS for the job.
It should also be noted that although Transmile is in the red, net cash flow generated from operations stood at rm8.99 million as at Sept 30, 2010. It also has cash and cash equivalents of rm77.5 million.
However, there is one caveat: Transmile’s cash reserves are depleting. The company has been making losses in the past two consecutive quarters.
It is unlikely that its two main shareholders – Kuok and POS – will inject more capital to beef up its shareholders’ funds.
In fact, rumors have been circulating that POS Malaysia is looking to dispose of its stake in Transmile – something which Transmile denies.
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What’s Up… dated Jan 2011
More than three years after Transmile Group Bhd’s (TGB) accounting scandal became public, the company is starting to address its debt problems by selling four aircraft for RM208.8 million.
This is seen as a positive first step and will go some way towards paring its outstanding borrowings that total nearly RM530 million.
But will it be enough for the company to pull itself out of its dire financial predicament?
Some are doubtful, noting that creditors may have to take a big haircut on their remaining debt, which will be still a sizable RM320 million, as TGB has few prime assets left.
TGB announced the disposal of four aircraft belonging to its wholly owned subsidiary Transmile Air Services Sdn Bhd (TAS) for RM208.8 million in cash. It announced that it had entered into a sale and purchase agreement with US-based Federal Express Corp to dispose of four MD-11F aircraft at US$17 million each (approximately RM52.2 million each, at exchange rate of RM3.07 per US dollar) to the global logistics company.
According to TGB, the aircraft are not revenue generating and have been left idle since April 2008, as the company was not able to identify any viable routes to use them on. The disposal provides an opportunity to realise the value of the aircraft and also to partially settle the group’s outstanding debt.
Furthermore, the idling of the aircraft continues to be a financial burden to the company due to the fixed parking, storage and maintenance costs and other expenses of approximately RM1.18 million per annum that need to be incurred for the aircraft.
The amount derived from the disposal will be used to reduce the group’s outstanding debt.
While the disposal is expected to expedite the debt restructuring, the company is still in the midst of negotiation with its lenders and has yet to reach a consensus on a debt-restructuring proposal which is expected to form a critical part of the regularisation plan under its PN17 status. Hence, TGB, which has been in default on its debt for the past three years, is unlikely to be able to submit a regularisation plan by the Feb 23 2011 deadline.
TAS’ lenders have consented to the disposal while the High Court had also granted an order for the disposal.
Transmile hoped for the sale to be completed by the second quarter of 2011.
Another condition to the sale of the aircraft being completed hinges on TAS's restraining order against a winding-up petition.
In April 2010, TGB was threatened with receivership after it missed payments to Malaysian Trustee Bhd (MTB), which represents five medium-term note (MTN) holders.
TGB’s debts amounted to about RM528.9 million, as at Sept 30, 2010. This includes a syndicated term loan of US$66.9 million, MTNs of RM105 million and guaranteed convertible bonds of US$65.6 million. The amount owed to MTB was RM106.12 million, being the principal, coupon and default interest due and owing as at March 24, last year in relation to the MTN programme.
Will the sale of the aircraft mark the beginning of a turning point for TGB?
Observers say it is a positive step in the right direction. It shows the management is seriously addressing its debt problems. But its debts are just too big.
TGB had not been able to obtain the high prices they were earlier hoping for the aircraft. The original book cost for the four aircraft was RM473.66 million, based on the amount transferred to “assets held for sale” in its 2009 annual report.
TGB could fetch up to RM500 million for all four planes based on queries by the prospective buyers from the US and Europe . At that price, most of TGB’s debt problems would have been resolved, but now TGB has only managed to sell them for 40% of what it had previously hoped for.
After the disposal, the company will have few prime assets left and may not be able to fully cover the remaining estimated debt of about RM320 million.
In terms of fixed assets, the company is believed to still have two aircraft. It noted in its 2009 annual report that it continues to serve its major customer, DHL Express, in collaboration with their regional airline, Air Hong Kong Ltd, and TGB’s associate company, K-Mile Air Co Ltd in Thailand . In 2009, TGB also launched new flights to Labuan and Bintulu to serve the growing oil and gas industry in East Malaysia .
Transmile’s December 2009 financial statements shows it still holds RM132.86 million of fixed assets and RM86.4 million in cash, of which RM30 million is held in trust for its restructuring. Of the fixed assets, the planes have a book value of RM56.19 million, written down from an original cost of RM356.44 million. Another RM29.59 million is in aircraft parts and equipment, written down from their original cost of RM98.1 million.
If TGB sells these assets at closer to their original cost — which appears unlikely — rather than their written down value, then it has a better chance of repaying all its debts.
The question that remains is how Transmile plans to resolve the remaining RM310 million in debts and how much of a haircut its creditors will be willing to accept.
Another question is who will get paid first. Transmile currently owe over rm500 million in the form of convertible bonds and MTNs.
One of the MTN holders is the EPF, which maintains that it should be paid before anyone bit Transmile has disputed this on the grounds that there is no ranking when it comes to creditors.
The MTN holders were not able to wind up Transmile and its subsidiaries as the latter sought a restraining order from the court to stop the any proceedings by its creditors. The RC expires at the end of Jan 2011.
There is still a possibility that the MTN holders will pursue liquidation of the company as they would be able to recover part of the amount due from its asserts such as its properties and its Boeing 727 and 737 aircraft. If they do, it is unclear how much they would be able to get from the disposal of the remaining assets.
Transmile can still make some profits with its existing narrow body aircraft and other ancillary services. On top of that, the company is constantly looking for new business opportunities to enhance its revenue stream and improve profitability.
One lucrative domestic contract is flying parcels to East Malaysia for POS. The contract has been extended to 2015. It is understood that Transmile and Gading Aviation Sdn Bhd are the only two companies contracted by POS for the job.
It should also be noted that although Transmile is in the red, net cash flow generated from operations stood at rm8.99 million as at Sept 30, 2010. It also has cash and cash equivalents of rm77.5 million.
However, there is one caveat: Transmile’s cash reserves are depleting. The company has been making losses in the past two consecutive quarters.
It is unlikely that its two main shareholders – Kuok and POS – will inject more capital to beef up its shareholders’ funds.
In fact, rumors have been circulating that POS Malaysia is looking to dispose of its stake in Transmile – something which Transmile denies.
******************************
What’s Up… dated Jan 2011
More than three years after Transmile Group Bhd’s (TGB) accounting scandal became public, the company is starting to address its debt problems by selling four aircraft for RM208.8 million.
This is seen as a positive first step and will go some way towards paring its outstanding borrowings that total nearly RM530 million.
But will it be enough for the company to pull itself out of its dire financial predicament?
Some are doubtful, noting that creditors may have to take a big haircut on their remaining debt, which will be still a sizable RM320 million, as TGB has few prime assets left.
TGB announced the disposal of four aircraft belonging to its wholly owned subsidiary Transmile Air Services Sdn Bhd (TAS) for RM208.8 million in cash. It announced that it had entered into a sale and purchase agreement with US-based Federal Express Corp to dispose of four MD-11F aircraft at US$17 million each (approximately RM52.2 million each, at exchange rate of RM3.07 per US dollar) to the global logistics company.
According to TGB, the aircraft are not revenue generating and have been left idle since April 2008, as the company was not able to identify any viable routes to use them on. The disposal provides an opportunity to realise the value of the aircraft and also to partially settle the group’s outstanding debt.
Furthermore, the idling of the aircraft continues to be a financial burden to the company due to the fixed parking, storage and maintenance costs and other expenses of approximately RM1.18 million per annum that need to be incurred for the aircraft.
The amount derived from the disposal will be used to reduce the group’s outstanding debt.
While the disposal is expected to expedite the debt restructuring, the company is still in the midst of negotiation with its lenders and has yet to reach a consensus on a debt-restructuring proposal which is expected to form a critical part of the regularisation plan under its PN17 status. Hence, TGB, which has been in default on its debt for the past three years, is unlikely to be able to submit a regularisation plan by the Feb 23 2011 deadline.
TAS’ lenders have consented to the disposal while the High Court had also granted an order for the disposal.
Transmile hoped for the sale to be completed by the second quarter of 2011.
Another condition to the sale of the aircraft being completed hinges on TAS's restraining order against a winding-up petition.
In April 2010, TGB was threatened with receivership after it missed payments to Malaysian Trustee Bhd (MTB), which represents five medium-term note (MTN) holders.
TGB’s debts amounted to about RM528.9 million, as at Sept 30, 2010. This includes a syndicated term loan of US$66.9 million, MTNs of RM105 million and guaranteed convertible bonds of US$65.6 million. The amount owed to MTB was RM106.12 million, being the principal, coupon and default interest due and owing as at March 24, last year in relation to the MTN programme.
Will the sale of the aircraft mark the beginning of a turning point for TGB?
Observers say it is a positive step in the right direction. It shows the management is seriously addressing its debt problems. But its debts are just too big.
TGB had not been able to obtain the high prices they were earlier hoping for the aircraft. The original book cost for the four aircraft was RM473.66 million, based on the amount transferred to “assets held for sale” in its 2009 annual report.
TGB could fetch up to RM500 million for all four planes based on queries by the prospective buyers from the US and Europe . At that price, most of TGB’s debt problems would have been resolved, but now TGB has only managed to sell them for 40% of what it had previously hoped for.
After the disposal, the company will have few prime assets left and may not be able to fully cover the remaining estimated debt of about RM320 million.
In terms of fixed assets, the company is believed to still have two aircraft. It noted in its 2009 annual report that it continues to serve its major customer, DHL Express, in collaboration with their regional airline, Air Hong Kong Ltd, and TGB’s associate company, K-Mile Air Co Ltd in Thailand . In 2009, TGB also launched new flights to Labuan and Bintulu to serve the growing oil and gas industry in East Malaysia .
Transmile’s December 2009 financial statements shows it still holds RM132.86 million of fixed assets and RM86.4 million in cash, of which RM30 million is held in trust for its restructuring. Of the fixed assets, the planes have a book value of RM56.19 million, written down from an original cost of RM356.44 million. Another RM29.59 million is in aircraft parts and equipment, written down from their original cost of RM98.1 million.
If TGB sells these assets at closer to their original cost — which appears unlikely — rather than their written down value, then it has a better chance of repaying all its debts.
With the latest disposal paring its debt by about 40%, creditors will likely get the same proportion of their money back. However, observers say that the company’s creditors may have to be prepared for a haircut on part of the remaining debt, if further asset sales are insufficient.
Meanwhile the Employees Provident Fund (EPF) is keen for aircraft sale by troubled air cargo carrier Transmile Group Bhdto go through as quickly as possible.
Meanwhile the Employees Provident Fund (EPF) is keen for aircraft sale by troubled air cargo carrier Transmile Group Bhdto go through as quickly as possible.
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