UPDATE 1-Lessors oppose Malaysia Airlines restructuring plan -letter

(Recasts with response from company, details from the letter)

SINGAPORE/PARIS, Oct 10 (Reuters) - A group of leasing companies has rejected a restructuring plan put forward by Malaysia Airlines, bringing the state carrier closer to a showdown over its future.

Lessors claiming to represent 70% of the airplanes and engines leased to the airline group have called the plan “inappropriate and fatally flawed” and pledged to challenge it, according to people familiar with the matter and a letter from a London law firm seen by Reuters.

However, some leasing companies have endorsed the plan, one of the people said, declining to be named due to the sensitivity of the matter.

Law firm Clifford Chance, which sent the letter on behalf of the lessors, did not respond to a request for comment.

In an email to Reuters, Malaysia Aviation Group (MAG), the airline’s parent company, said on Saturday it was “pleased” with the level of support it had received from its lessors and was continuing discussions with them.

“(MAG) is confident that there are appropriate legal mechanisms available should that support not be universal,” it said.

“MAG reiterates that the spirit of its restructuring plan is not intended to create unnecessary pain among its creditors but is done in good faith to drive for the long-term survivability of MAG and its dependent value chain of partners,” it said.

The airline group is seeking to implement the restructuring plan through a UK court process, according to sources.

The letter from the law firm further raises the stakes after Reuters reported that the Malaysian airline group had warned lessors that its shareholder, state fund Khazanah, would stop funding the group and force it into a winding down process if restructuring talks were unsuccessful.

The letter, dated Oct. 8, states that if the airline group “insists on proceeding with the proposed restructuring plan (RP), our clients will use all means at their disposal to challenge it on all possible grounds.”

Malaysia Airlines is one of dozens of carriers severely hit by the coronavirus crisis, which has battered demand for air travel. (Reporting by Anshuman Daga in Singapore and Tim Hepher in Paris; Editing by Marguerita Choy and Richard Pullin)