Air France-KLM launches 2.3 bln euro rights issue
16:30 JST, May 24, 2022
PARIS (Reuters) – Air France-KLM AIRF.PAon Tuesday announced a 2.26-billion-euro ($2.41 billion) rights issue to existing shareholders to strengthen its balance sheet and further repay French state aid as the airline industry clambers out of a two-year COVID crisis.
The second capital hike in as many years brings Europe’s second largest airline by revenue closer to repaying government pandemic support and meeting European Union conditions for participating in any future airline sector consolidation.
European airlines are experiencing a surge in ticket sales clouded by fears of a recession triggered by inflation and the war in Ukraine.
CEO Ben Smith said the widely anticipated move was part of efforts to “strengthen our financial autonomy” and regain strategic and operational flexibility.
“As the recovery continues and our economic performance recovers…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,” he said in a statement.
Air France-KLM shares fell 6% in early trading.
Italy is looking for bids for ITA Airways, the successor to Alitalia, with likely bidders including a consortium led by U.S. private equity fund Certares and involving Air France-KLM, two sources close to the matter said on Monday.
Air France-KLM declined comment on ITA on Tuesday.
In 2020, Air France-KLM received 10.4 billion euros in loans backed by France and the Netherlands.
Air France-KLM said in February it planned to raise up to 4 billion euros.
Under the latest planned rights issue, the French and Dutch states, the airline group’s largest shareholders, plan to participate and keep their holdings unchanged, the company said.
Airline partners China Eastern Airlines 600115.SS and Delta Air Lines DAL.N will see their stakes reduced, however.
Air France-KLM also confirmed a goal of reducing the ratio of net debt to earnings before interest, tax, depreciation and amortization (EBITDA) to around 2.0-2.5 by 2023.
The rights issue will run from May 27 to June 9 at 1.17 euros per new share or 3 new shares per existing share and will allow the group to repay some bonds and strengthen its balance sheet, the statement said.
Proceeds will be used to repay deeply subordinated bonds issued in April 2021 and held by the French state.
The plan also makes room for French shipping company CMA CGM to become a core shareholder in Air France-KLM after the two firms announced a tie-up in the freight sector last week.
CMA has committed to subscribe for up to 400 million euros’ worth of shares, capping its new shareholding at 9%.
China Eastern and Delta are participating on a “cash neutral” basis by selling part of their rights to CMA and using only the proceeds from that deal to take part in the issue, Air France-KLM said.
($1 = 0.9376 euros)
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