Controversial special purpose vehicle EA Partners has issued a $115 million notification of default with regard to two loans to Air Serbia, a carrier 49% owned by the Etihad, ultimate owners of the investment entity itself.
Etihad Airways Partners was set-up in 2015 to support the growth of airlines which were part of the Abu Dhabi carrier’s group. That year Air Serbia, which is majority owned (51%) by the Serbian state, took out a $52.9 million loan maturing this September with an annual interest rate of 6.96%. Air Serbia then tapped EA Partners in 2016 for a further $63 million which matures in June next year.
In a notification of a potential debt obligation event of default to the London Stock Exchange, EA Partners said, “As a result of the ongoing economic uncertainty in relation to Covid-19, and due to the official closure on March 19, 2020 of airports in the Republic of Serbia for inbound and outbound flights, [Air Serbia] has notified the [EA Partners] of its inability to perform its principal business activity of worldwide civil air transportation and, therefore, of its potential inability to satisfy its obligations under Clause 6 (Repayment) of the Debt Obligation Agreement and any further payment obligations under the Debt Obligation Agreement”.
It added, “The Issuer hereby confirms that any such default under the Debt Obligation Agreement would, in accordance with Note Trust Deed, render it a Defaulted Debt Obligation.
According to EA Partner’s filing Air Serbia is looking to negotiate a solution and the carrier met its most previous payment date which was due on March 19, 2020.
Air Serbia’s problems may be due to COVID 19, but EA Partners has run into issues even in more benign aviation environments, in 2016 Etihad Airways had to agree to repay a portion of two bonds maturing in 2020 and 2021 on behalf of Alitalia if the Italian airline defaulted.