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Friday, July 8, 2022

Air France-KLM seeks to raise $2.4bn in new share issue

Air France-KLM on Tuesday announced a bid to raise €2.26 billion by issuing new shares, as the debt-laden company seeks to put the coronavirus crisis that has ravaged its finances behind it.

The COVID-19 pandemic cost the Franco-Dutch airline some €11 billion over two years, after travel ground to a halt.The airline has some €7.7 billion of debt despite massive bailouts by the French and Dutch governments, which own minority stakes in the former flag carriers that merged in 2004.

The company’s shares fell by 5.41 per cent on Tuesday morning to €4.11 per share after the announcement.

The French and Dutch governments will take part in the latest funding round and keep the same percentage of shares, the airline said. The French state is the largest stakeholder with 28.6 per cent, while Netherlands holds 9.3 per cent. But two other main shareholders, the Chinese company China Eastern and the United States’ Delta Air Lines will see their stakes reduced in favour of a new player, French shipping giant CMA CGM.

China Eastern will see its share reduce to 4.7 per cent from 9.6 per cent, and Delta from 5.8 per cent to 2.9 per cent.CMA CGM, based in the Mediterranean port city of Marseille, will invest up to €400 million, Air France-KLM said in a statement.

The French shipping company said last week it would take its stake up to nine per cent. This would make CMA CGM the third shareholder in the round of funding that starts on Wednesday and closes on June 9 goes as planned.

The main purpose of the planned share issue is to repay the aid provided by the French state. During the first recapitalisation operation, the French government agreed to convert three billion euros in loans into perpetual hybrid Air France-KLM bonds given that are considered as a form of equity. The European Commission gave the green light for the aid, which saw France’s share double, as part of the exceptional measures taken to support businesses during the health crisis. But the company was forced to make concessions including giving up slots at Orly, Paris’ second-largest airport after Charles de Gaulle.

The main purpose of the planned share issue is to repay the aid provided by the French state
The airline, which plans to hold a general assembly with shareholders later on Tuesday, announced last week €500 million from the American private equity firm Apollo would go towards reimbursing the French state. Apollo plans to invest in the company’s subsidiary that owns a fleet of Air France spare engines.



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