Malaysia hires Morgan Stanley to find solution for ailing national airline

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Malaysia’s sovereign wealth fund Khazanah Nasional, the owner of Malaysia Airlines, has hired US financial services firm Morgan Stanley to explore strategic options for the ailing carrier, including a potential stake sale.

In an address to the Malaysian parliament on July 24, 2019, deputy minister Mohamed Farid Md Rafiq confirmed that Morgan Stanley will act as an independent advisor in Malaysia Airlines recovery efforts.

The bank will assess possible options for the carrier’s future, including privatisation. Khazanah is reportedly looking to finalise a deal by the end of the year, although the timeline is subject to change, according to Bloomberg.

According to Malaysia’s Prime Minister Mahathir Mohamad, who has spoken out on the issue many times to Malaysian press, “all options” were on the table.

“We have changed the management of the airline many times. Everyone promises that they can turn around the company, but in the end they all failed,” he noted.

It seems to be all possible for Malaysia Airlines: Another restructuring plan, an injection of funds, a potential sale and even a shutdown of the airline altogether have all been floating around, with many prominent Malaysian observers calling for the government not to close the national carrier and speaking out against another cash injection.

Some speculate that Morgan Stanley’s entry hints at the involvement of foreign carriers in the restructuring.

“Hiring a foreign investment bank without a Malaysia office portends to a likely sale transaction of some form of debt, equity or a mix thereof, in the airline. It is also more likely to involve foreign-tinted entities,” Khair Mirza, former senior general manager at Malaysia Airports and now associate director for airport privatisation, development and finance at the Malaysian branch of Canadian Transport infrastructure consultancy Modalis Infrastructure Partners, told The Edge Financial Daily.

That said, the prospect of saving the airline with the help of a strategic partner seemed to have solidified. Mahathir has stressed that the state would be willing to give up its “majority” stake in the carrier, as long as it “has a say” in how it is run and on the condition that Malaysian Airlines retains its identity as the national carrier.

On July 9, 2019, Mahathir confirmed the government had received and was studying four proposals, reportedly from Malaysian companies, but not named by him, which had offered to either buy a stake in the flag carrier or manage it. Among the potential investors was a consortium led by a former chairman of AirAsia Group, Pahamin Rajab. AirAsia founder Tony Fernandes later refuted the claims, saying his airline had no involvement with the national carrier.

Other speculation surrounding potential suitors pointed to Singapore Airlines, after Malaysia Airlines inked a memorandum of understanding with the carrier late in June 2019 aimed at a strategic tie-up, among other enhancements, building on the two airlines’ existing code share agreement for flights between Malaysia and Singapore. The flag carrier of Singapore, however, has so far shown no interest in making an investment.

After Malaysia Airlines was nationalised in 2014, Khazanah, the sole shareholder of the flag carrier, initiated a restructuring process, pouring $1.5 billion into the company. The recovery plan also saw the layoff of 6,000 staff. Since then, the airline has been scaling-down its network and now employs a workforce of only 7,159.

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Malaysia’s sovereign wealth fund Khazanah Nasional, the owner of Malaysia Airlines, has hired US financial services firm Morgan Stanley to explore strategic options for the ailing carrier, including a potential stake sale. In an address to the Malaysian parliament on July 24, 2019, deputy minister Mohamed Farid Md Rafiq confirmed that Morgan Stanley will act as an independent advisor in Malaysia Airlines recovery efforts. The bank will assess possible options for the carrier’s future, including privatisation. Khazanah is reportedly looking to finalise a deal by the end of the year, although the timeline is subject to change, according to Bloomberg....

Reading Time: 2 minutes

Auto Draft

Malaysia’s sovereign wealth fund Khazanah Nasional, the owner of Malaysia Airlines, has hired US financial services firm Morgan Stanley to explore strategic options for the ailing carrier, including a potential stake sale.

In an address to the Malaysian parliament on July 24, 2019, deputy minister Mohamed Farid Md Rafiq confirmed that Morgan Stanley will act as an independent advisor in Malaysia Airlines recovery efforts.

The bank will assess possible options for the carrier’s future, including privatisation. Khazanah is reportedly looking to finalise a deal by the end of the year, although the timeline is subject to change, according to Bloomberg.

According to Malaysia’s Prime Minister Mahathir Mohamad, who has spoken out on the issue many times to Malaysian press, “all options” were on the table.

“We have changed the management of the airline many times. Everyone promises that they can turn around the company, but in the end they all failed,” he noted.

It seems to be all possible for Malaysia Airlines: Another restructuring plan, an injection of funds, a potential sale and even a shutdown of the airline altogether have all been floating around, with many prominent Malaysian observers calling for the government not to close the national carrier and speaking out against another cash injection.

Some speculate that Morgan Stanley’s entry hints at the involvement of foreign carriers in the restructuring.

“Hiring a foreign investment bank without a Malaysia office portends to a likely sale transaction of some form of debt, equity or a mix thereof, in the airline. It is also more likely to involve foreign-tinted entities,” Khair Mirza, former senior general manager at Malaysia Airports and now associate director for airport privatisation, development and finance at the Malaysian branch of Canadian Transport infrastructure consultancy Modalis Infrastructure Partners, told The Edge Financial Daily.

That said, the prospect of saving the airline with the help of a strategic partner seemed to have solidified. Mahathir has stressed that the state would be willing to give up its “majority” stake in the carrier, as long as it “has a say” in how it is run and on the condition that Malaysian Airlines retains its identity as the national carrier.

On July 9, 2019, Mahathir confirmed the government had received and was studying four proposals, reportedly from Malaysian companies, but not named by him, which had offered to either buy a stake in the flag carrier or manage it. Among the potential investors was a consortium led by a former chairman of AirAsia Group, Pahamin Rajab. AirAsia founder Tony Fernandes later refuted the claims, saying his airline had no involvement with the national carrier.

Other speculation surrounding potential suitors pointed to Singapore Airlines, after Malaysia Airlines inked a memorandum of understanding with the carrier late in June 2019 aimed at a strategic tie-up, among other enhancements, building on the two airlines’ existing code share agreement for flights between Malaysia and Singapore. The flag carrier of Singapore, however, has so far shown no interest in making an investment.

After Malaysia Airlines was nationalised in 2014, Khazanah, the sole shareholder of the flag carrier, initiated a restructuring process, pouring $1.5 billion into the company. The recovery plan also saw the layoff of 6,000 staff. Since then, the airline has been scaling-down its network and now employs a workforce of only 7,159.

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