Rex airline is facing a financial crisis just months after assuring shareholders of profitability. Court documents reveal the airline's desperate search for funding and its misleading claims about its financial health.
Less than two months after Regional Express told shareholders the company would end the 2023 financial year in profit, executive chairman Lim Kim Hai desperately began searching for a financial lifeline.
The airline’s cash reserves are “critically low” while domestic sales are “disappointingly and bewilderingly bad”, Lim told fellow board directors, and sought a $10 million cash injection from PAG – the private equity firm that loaned $150 million to Rex in 2021, according to documents filed in the New South Wales Supreme Court as part of the corporate regulator’s investigation into the collapsed business.The Australian Securities and Investments Commission (ASIC) last month launched legal action against Rex and its four directors – including Lim and former Howard minister John Sharp – for misleading and deceiving investors about its profitability. ASIC has alleged the airline misled the market in February 2023 when it claimed it was “optimistic the group would have positive operating profits for the full year 2023 barring any further external shocks”. But court documents allege Rex had not prepared a forecast for the 2023 financial year, had recorded an operating loss of $30 million in the first half, and knew that it generally generated lower revenue in the second half. “On 21 March 2023, Lim received the year-to-date and monthly profit-and-loss figures for the Rex Group for February 2023, and Rex was thereby aware that the Rex Group had incurred an operating loss of approximately $46.2 million,” ASIC has alleged in documents filed with the NSW Supreme Court.“On 14 April 2023, Lim made a request by email to Pan and Khotkar (copying Sharp) requesting $10 million in funding from PAG, describing the company’s cash reserves as ‘critically low’, domestic sales as ‘disappointingly and bewilderingly bad’, the February results as having ‘crashed’ and a lack of recovery in Marc
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