Air France-KLM has launched a €2.256bn capital increase aiming to strengthen the company’s equity and balance sheet. The company will issue 1,928 million new shares in Air France-KLM at €1.17 per new share, with preferential subscription rights to existing shareholders maintained. Subscription parity will be 3 new shares per 1 existing share.
The net proceeds of the issue will be allocated to repaying the deeply subordinated bonds issued in April 2021 and held by the French State as well as strengthening Air France-KLM’s equity.
Air France-KLM has reiterated its intention to free itself from the conditions set by the European Commission’s temporary framework and plans to allocate circa €1.7bn to the repayment of the "Covid-19 recapitalization aid" granted in the form of undated subordinated notes (the "TSS État") issued in April 2021. The remainder will be allocated to reduce the company’s net indebtedness.
Air France-KLM states that it has a sound financial liquidity position of €10.8bn of cash at hand as of March 31, adding that a “better oriented operational context for the company”, will enable it to further repay the French State Aid over the next quarters. The repayment of the State Aid will also improve its financing costs, says Air France-KLM. The airline group aims to reduce its Net debt / EBITDA ratio, to reach circa 2.0x to 2.5x by 2023.
The French State, which owns 28.6% of Air France-KLM, has confirmed its intention to participate in the Rights Issue, so that its post-transaction shareholding remains unchanged. Air France-KLM said that the subscription, should it occur, would be completed through offsetting claims held by the French State in respect of the deeply subordinated notes (TSS Etat) issued in April 2021 for an amount of circa €645 million.
The Dutch State (which holds 9.3% of the Company’s share capital and 13.8% of the voting rights) also intends to exercise its rights in proportion to its current shareholding in order for its shareholding to remain unchanged post Rights Issue, subject to obtaining the necessary approvals from the Dutch Parliament.
The transaction will enable CMA CGM to become a new reference shareholder and an exclusive strategic partner for the cargo business, as announced on May 18. CMA CGM has committed to subscribe to the transaction for a maximum amount of €400 million (including the acquisition of Rights) and in such a way that its total shareholding does not exceed 9% of the company’s resulting share capital.
China Eastern Airlines and Delta Air Lines have committed to participate in the Rights Issue on a cash neutral basis by subscribing to new shares through the sale of part of their Rights, using the net proceeds from selling Rights to CMA CGM.
“The operation we are launching today is the result of the work we have been doing for several months to consolidate our balance sheet, strengthen our financial autonomy and regain strategic and operational flexibility,” said Benjamin Smith, CEO of Air France – KLM. “As the recovery continues and our economic performance recovers, in particular thanks to our ambitious transformation plan and the structural benefits it continues to deliver, we want to be in a position to seize any opportunity in a changing aviation sector and to be able to accelerate our environmental commitments. I would like to thank our main shareholders for their renewed support in this operation, and I am also delighted to welcome CMA CGM to our capital, as a new reference shareholder and industrial partner in our cargo activities.”
The Subscription Commitments total approximately €360 million and represent 15.96% of the amount of the Right Issue.
Deutsche Bank, HSBC, Natixis, Crédit Agricole-CIB and Société Générale are acting as joint global coordinators, lead managers and joint bookrunners; ABN AMRO Bank, Banco Santander, Citigroup and Coöperatieve Rabobank are acting as joint bookrunners; Crédit Industriel et Commercial, MUFG Securities (Europe) and SMBC Bank EU are acting as co-lead managers.