Budget carrier AirAsia Bhd has secured a $443 million dual-tranche private financing to use partly for refurbishing planes grounded during the pandemic, according to people familiar with the matter.

Private credit funds Ares Management Corp. and Indies Capital Partners Pte. Ltd. provided a $200 million tranche for the refurbishment of the aircraft to get them back in the air, said the people who asked not to be identified discussing private matters. Aircraft lessors provided the other $243 million portion to refinance lease liabilities.

AirAsia’s structured deal is another instance of the growing popularity of private credit in Asia that is fast becoming a serious rival to mainstream lending by offering higher, floating rates of return. 

The financing, structured as privately-placed bonds linked to revenue, is secured by the sale of future airline tickets from AirAsia’s key routes, the people said.

Evercore Asia Ltd is AirAsia’s financial advisor, while A&O Shearman is its international counsel. Milbank LLP is representing the lenders.

Ares declined to comment. A&O Shearman, Evercore, Indies and Milbank did not immediately respond to requests for comment. 

The financing from private credit funds will help 10 aircraft take flight by October and another 15 in 2025, said Bo Lingam, group chief executive officer of AirAsia Aviation Group Ltd., an affiliate of AirAsia.

“[The Malaysian] ringgit has also strengthened, and fuel prices have dropped,” Lingam said. “All these added to the positive outlook for the company.”

The company plans to follow up the landmark revenue-linked bond with an equity-based fundraising later this year, said Farouk Kamal, deputy group CEO for AirAsia Aviation.

The private credit tranche of AirAsia’s latest securitized deal pays a coupon of 11% per annum and has a four-year tenor, the people said. The lessor piece offers 7% per year and carries a two-year maturity. The deal has been signed but not yet funded.

The terms of the transaction have changed from the initial stage, which circulated in the second half of last year, following negotiations, according to the people.

AirAsia is no stranger to the private credit space. The carrier’s engineering and maintenance affiliate Asia Digital Engineering Sdn. Bhd. in April 2023 had raised $100 million from investment firm OCP Asia Ltd., according to a statement at the time.

The budget airline is also looking to expand its medium to long-haul network to Europe and West Coast North America, underpinning its ambition to expand globally throughout the decade.