* ‘Minor dilution’ after debt-to-equity conversions * Talks of new investors to wait till earliest 2022 * Market oversupply, industry consolidation inevitable (Adds quotes, background) KUALA LUMPUR, March 4 (Reuters) - Malaysian sovereign wealth fund Khazanah Nasional’s holding in Malaysia Airlines has been diluted as a result of debt-to-equity conversions that were part of the airline’s debt restructuring plan, the fund said on Thursday. Khazanah said there was a “minor dilution” to its equity in the national carrier due to debt-for-equity conversions that some creditors took up, and that the fund remained the largest shareholder. “(The debt-to-equity conversion) adds more value to the existing equity holders by taking out liability from the balance sheet,” Managing Director Shahril Ridza Ridzuan said at a virtual press briefing, without elaborating. The fund took Malaysia Airlines private in 2014. Shahril also said discussions surrounding bringing in new investors to the airline will probably have to wait until after a recovery in the industry. “The only deals that are being done are either fire sales or insolvency proceedings ... We don’t expect that (discussion) really, until 2023, maybe 2022 at the earliest,” he said. Malaysia Aviation Group, the parent company of Malaysia Airlines, said last month Khazanah committed new capital of 3.6 billion ringgit to the group to fund the business through to 2025. Shahril said this capital injection was “to give certainty to the plan” so that creditors could in turn provide discounts, haircuts and partake in debt-to-equity conversions required to fix the balance sheet. He also said that due to a long-time oversupply in the country’s aviation market, “some form of consolidation is now inevitable” after the coronavirus pandemic hit to the industry. “If the industry were to continue post-COVID with same situation of oversupply then what we’ll see is more airlines failing,” he said.