Air France-KLM raises €800mn in bond issue

Air France-KLM has managed to raise EUR800 million euros (USD954 million) in additional capital through the issuance of new bonds. Two tranches of the senior notes obtained EUR300 million (USD358 million) and EUR500 million (USD596 million), the company announced after trading on June 24.

The net proceeds from the issue will refinance both existing debt and “gradually part of the state aid debt package granted in late May 2020,” the group said. The transaction is “part of the company’s ongoing plan to reinforce the balance sheet, manage liquidity, and prepare for recovery.”

The first tranche has a maturity of three years and an annual coupon of 3%. The second runs for five years and bears coupon at an annual rate of 3.875%.

According to a message, the Air France (AF, Paris CDG) and KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) parent sent to investors before trading started on June 24, the group had received more than EUR2.2 billion (USD2.62 billion) worth of demand for the bond sale, sources told Reuters. It had set initial pricing at 3.75% for the three-year bond and 4.5% for the five-year bond and expected to raise EUR300 million from each of the two tranches.

The new issue’s premium was intended to incentivise investors, as its outstanding January 2025 bonds have a yield of 2.95%.

Speaking at the virtual Paris Air Forum last week, Air France-KLM CEO Ben Smith said he had recently been surprised at demand in the visiting friends and family segment, commenting: “We are hoping to run about 60-65% of capacity this summer.” But earlier this month, the group said it had so far seen little sign of a summertime travel recovery.