Franco-Dutch carrier Air France-KLM announced a $2.419 billion (€2.256 billion) rights issue to existing shareholders to strengthen the company’s equity and balance sheet.
The move, which was announced on May 24, 2022, comes as an additional recapitalization measure and is expected to help the airline to reduce the ratio of its existing net debt. It will also further repay French State Aid, allocated to the carrier in April 2021, over the remaining quarters of 2022.
“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,” the statement quoted Air France–KLM CEO Benjamin Smith as saying.
“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,” Smith added.
To maintain its current 9.3% stake in Air France-KLM at the same level, the Dutch State has confirmed its intention to purchase new shares. However, the Dutch parliament has yet to approve this acquisition. The French State, which currently owns an 28.6% stake and is airline group’s largest shareholder, has also informed the airline of its plans to participate in the latest planned rights issue, “so that its post-transaction shareholding remains unchanged”.
Meanwhile, China Eastern Airlines (CIAH) (CEA) and Delta Air Lines, another two shareholders of Air France-KLM, will participate in the rights issue “on a cash neutral basis”. The two airlines aim to sell a part of the rights that both carriers currently hold to French shipping company CMA CGM.
“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 the Company’s equity. This operation, together with the other contemplated measures to strengthen the balance sheet and the expected EBITDA recovery, will enable the Company to strengthen its financial trajectory,” the Air France-KLM statement reads.
The rights issue will run from May 27 to June 9, 2022 at $1.3 (€1.17) per new share.