Rex claims $150m notes issue not at risk after ASIC clampdown

Rex claims $150m notes issue not at risk after ASIC clampdown

Australian air services group Regional Express Holdings (ASX: REX) has claimed the corporate watchdog's plans to clip its wings in relation to raising capital will not affect a planned $150 million funding boost by an Asian investment firm.

ASIC yesterday declared that Rex could not utilise exemptions for reduced disclosure in fundraising documents until 14 December 2021. Basically, it has ordered that Rex must issue a full prospectus in order to raise funds from investors.

The order cast some shadow over a $150 million convertible notes issue to Asian investment firm PAGAC Regulus Holding. The issue was announced in September and PAGAC last week received Foreign Investment Review Board approval to proceed with its investment in Rex.

ASIC's concerns stem from an article published in the Australian Financial Review in May when Rex deputy chairman John Sharp revealed the company's plans to invest $200 million to create a network of capital city routes. The move intimated that it would elevate Rex from a purely regional player to become Australia's third domestic carrier on major routes.

In a statement today, Rex disagreed with ASIC's assessment that by considering the feasibility of commencing domestic operations, and sharing that with the AFR, constituted a failure of the company's continuous disclosure obligations.

"Rex maintains a different view from ASIC and is considering its position in relation to ASIC's decision," the company says.

Rex also confirmed that the restrictions imposed on the company's capital raisings "do not impede the proposed transaction with PAGAC Regulus Holding for the issue by Rex of up to $150 million in convertible notes".

The company adds that it isn't proposing any other fundraisings in 2021 that would be affected by the ASIC restrictions.

Rex shares resumed trading this morning following a requested halt yesterday to respond to ASIC's actions. The shares edged 2 per cent higher in early trade.

The second-tier Australian airline was buoyed this week after securing approval from the Civil Aviation Safety Authority (CASA) to operate regular public transport services using the Boeing 737-800NG on its existing network.

The approval paves the way for Rex to begin domestic operations between Sydney and Melbourne from 1 March 2021.

The company plans to expand to other cities pending the success of the initial capital-city route.

Rex currently has a fleet of 60 Saab 340 aircraft that before COVID-19 delivered 1500 weekly flights to 59 destinations across Australia. Its domestic services next year will begin with six 737-800 aircraft.

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