Malaysian Air lines up $1.73 billion bond to buy new Airbus aircraft

KUALA LUMPUR (Reuters) - Loss-making Malaysian Airline System Bhd (MASM.KL) (MAS) has secured a state-backed Islamic bond facility to raise up to 5.3 billion ringgit ($1.73 billion) for the purchase of eight new widebody aircraft made by EADS's (EAD.PA) Airbus.

The state-guaranteed bond was established through Turus Pesawat Sdn Bhd, a special-purpose vehicle owned by the ministry of finance, MAS said in a statement on Tuesday.

MAS has been struggling to remain competitive due to an ageing fleet, rising fuel costs and competition from low-cost carriers such as AirAsia Bhd (AIRA.KL).

Funds raised will go towards the acquisition of six Airbus A380s and two A330s, said MAS. Notes issued under the bond will have a tenure of up to 20 years.

The company has two outstanding bonds. It sold 1 billion ringgit of Islamic bonds without a fixed maturity through a private placement in June, when it also issued a 500 million-ringgit Islamic bond. ($1=3.0630 Malaysian ringgits)

(Reporting by Al-Zaquan Amer Hamzah; Editing by Greg Mahlich)