Air France-KLM has priced the issuance of its €500 million hybrid bonds on May 15, 2025, at an annual fixed coupon of 5.75% and a yield of 5.875% until the first reset date.
The hybrid bonds, undated and deeply subordinated, will be rated BB by Fitch and B+ by S&P and will qualify for 50% equity credit with both rating agencies. Fitch and S&P reaffirmed Air France-KLM's long term issuer rating, respectively at BBB- and BB+, with both a stable outlook.
The company said its issuance was “very well received” by the market with an orderbook of over €1.75bn euros, representing an oversubscription rate of 3.5x.
“This result reflects investors' strong confidence in the company's strategy and the strength of its credit profile,” the company said in a statement.
Net proceeds will be used for general corporate purposes, including the potential refinancing of existing subordinated instruments within the group. This issue enables the group to simplify its balance sheet and optimise the cost of financing while maintaining financial flexibility.
A spokesperson for the company said the bonds will strengthen its credit ratings, as well as allow it to build up its equity while avoiding structural subordination.
Banks involved in the issuance include BNP Paribas, Citi, Goldman Sachs, Credit Agricole-CIB, HSBC, JP Morgan, Morgan Stanley, and Natixis.