The Regional Express (ASX: REX) share price is rising today after the company signed an agreement on funding for its domestic operations.
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The Regional Express Holdings Ltd (ASX: REX) share price is on the rise today after the company announced it has signed an agreement with PAG Regulus Holdings on funding for its domestic operations. At the time of writing, the Regional Express share price is trading at $1.51, up 2.7%.
What’s moving the Rex share price?
The Rex share price is edging higher on the company’s news that Asia-Pacific investment firm, PAG, will provide funds of up to $150 million. The injection of capital will support the launch of Regional Express’ domestic jet operations scheduled to commence on 1 March.
The investment will comprise of first ranking senior secured convertible notes. An initial funding tranche of $50 million will be drawn down towards early January 2021. Furthermore, the remaining balance will be available over the following 3 years.
Subject to shareholder approval, Regional Express will hold a vote on the deal at its AGM at the start of the new year. In addition, the Foreign Investment Review Board will also need to approve the proposed funding.
If permitted, and upon completion, PAG will nominate two of its directors to the Regional Express board.
What did management say?
Regional Express chair, Mr Lim Kim Hai, spoke about the partnership, saying:
PAG is a well-respected and highly successful investment group which manages more than USD40 billion on behalf of major global institutional investors.
Preparations for our domestic operations are proceeding to plan with our first Boeing 737 800NG aircraft delivered on 5 November 2020. Our crew will carry out training on the aircraft over the next 3 weeks before the CASA proving flight on 2 December 2020. We anticipate CASA approval shortly after. Five other similar aircraft will be delivered from next month to March 2021.
Once the initial services are well established, we aim to progressively grow our fleet to cover all the major cities in Australia.
Adding to Mr Hai’s comments, PAG chair and CEO, Mr Weijan Shan said:
We have been impressed with Rex’s established track record in regional aviation in Australia. Rex’s plan to provide Australia’s major cities with affordable and high-quality air travel is consistent with their disciplined and focused approach over the past 18 years. PAG is excited to partner with Rex on this expansion.
What’s been happening with the Regional Express share price
The Regional Express share price has come back strongly after being hit hard by COVID-19 lockdowns. Shares in the airline dropped to as low as 37 cents in March, before recovering to levels seen in 2019.
Regional Express considers itself as a competitive passenger airline for domestic routes, going up against Qantas Airways Limited‘s (ASX: QAN) QantasLink and Jetstar as well as Virgin Australia Holdings Ltd (ASX: VAH).
It’s worth noting that the Regional Express share price is now just 10% below its all-time high of $1.68 which it achieved back in October 2018.
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