Should MAS Went into Bankruptcy? (May 2014)

This is really a multi-billion ringgit question. Since MH370 flew to the great Indian ocean, the share price of MAS also went that deep down under. It has fallen to as low as RM0.15 on 19th May 2014, the lowest level in at least 10 years. It was the most actively traded penny stocks in Bursa Malaysia for past few days.

What should be the best solution for MAS ?

The plunge that day was due to reports saying that Prime Minister is exploring the possibility of letting MAS to file for bankruptcy. Would it be a wise move? Let's us look at a few more alternative ways to rescue MAS financially.

1. MAS to raise capital via private debts, be it issuing new shares or bonds.
   Easy to issue, but who is going to subscribe for it? In order to make it attractive enough, the bond paper must be backed by government and offering above than average yield. Higher yield means higher financing cost for MAS.
   
   
2. MAS to sold off its assets.
   After various rounds of turnaround plans, what assets still left other than those airplanes? Some more, were those assets have such significant value attached to it... still?
   
   
3. Borrow money from financial institutions.
   Here, I really have to pity those banks whom already borrowed money to MAS. If not because of this "government-linked company" status, I believe they won't borrow at all without a favorable interest charged.
   
   
4. MAS sold down its equity stakes, or being privatized.
   As a national carrier, partnering with another foreign carrier? You must be joking... Unless, it was being privatized and government ceased as shareholder. But, once government letting go his hands, would anyone interested to take over MAS?
   
   
5. Government continue pumping in money.
   Well, this is in fact the most common way seen in Malaysia. Being a GLC, MAS has this privilege since it was being incorporated. But, rakyat already started to voice their concern on how government spend money, especially on those consistent loss-making companies. It was like continue throwing money into Indian ocean once again.

Moreover, the business of MAS already dropped 60% since the missing of MH370. Coupled with a total net debt of around RM7 billion, how long can MAS survive? If government wants to preserved the national icon status, they must ready to pump in another few billion ringgit without money-back guaranteed.

In our opinion, filing for bankruptcy is indeed a wiser move for all parties (other than banks), sorry to say that. This is the only fastest way to clear all the current bad debts and start all over again for MAS. If Japanese airline JAL can done it successfully few years back and making profit now, why not MAS ?