Abra Group Secures $1.3 Billion to Refinance Debt

Abra Group has taken a significant step to stabilize its financial position by entering into a commitment letter with investment firm Castlelake, securing $1.3 billion in funds. This financing move aims to prevent the risk of default on Abra’s bonds, a risk heightened by the ongoing Chapter 11 bankruptcy proceedings of GOL Linhas Aéreas Inteligentes, one of the companies within Abra’s portfolio, reported ch-aviation.com.

The funds raised through this deal will be utilized to refinance Abra’s senior secured notes entirely, according to an investor notice released on August 18. Abra Group, which holds shares in GOL, Avianca Airlines, and Wamos Air, has been working diligently to reassure investors amid the challenging financial landscape.

Last week, Abra Group presented Castlelake’s refinancing proposal to its investors. The proposal includes refinancing Abra’s senior secured bonds, which are due in 2028, through a five-year loan that would be issued at a premium. Although no official public announcement has been made, reports suggest that Abra’s bondholders are generally supportive of the deal.

The new debt arrangement would carry a nominal interest rate of up to 14%, with semi-annual payments. This interest rate would be split into two parts: 6.0% as cash interest and the remainder as payment-in-kind (PIK). An alternative financing proposal reportedly involved giving warrant holders a stake in Abra, but the current plan with Castlelake appears to be the preferred option.

GOL Linhas Aéreas Inteligentes, a key player in the Abra Group’s portfolio, has been undergoing Chapter 11 bankruptcy proceedings since January 2024. The airline expects to emerge from these proceedings by 2025. GOL’s restructuring plan includes exit financing of over $3.5 billion, which will be funded through a combination of a capital raise, long-term restructuring of secured debt obligations, the issuance of new shares, and the continued acquisition of Boeing 737 MAX jets through the end of the decade.

While GOL has declined to comment on the financing arrangements, the move to secure $1.3 billion is seen as a crucial step in stabilizing Abra Group’s financial standing. The company’s efforts to secure this financing reflect its determination to navigate the complexities brought on by GOL’s bankruptcy and the broader challenges within the airline industry.

In addition to the refinancing efforts, Abra Group is also in discussions with Azul Linhas Aéreas Brasileiras regarding a potential merger with GOL. However, these negotiations have yet to result in a formal agreement, and Azul is concurrently working on improving its financial position with its own creditors.

Castlelake, the investment firm involved in the refinancing deal, holds a substantial portfolio of 189 aircraft, including ten aircraft leased to GOL (four Boeing 737-8s and six Boeing 737-800s). The firm is also part of the consortium that now owns SAS Scandinavian Airlines, which recently completed its own Chapter 11 restructuring. This involvement in both GOL and SAS underscores Castlelake’s active role in the airline industry’s ongoing financial restructuring efforts.

Abra Group’s successful securing of $1.3 billion in funds through Castlelake not only helps mitigate immediate financial risks but also positions the group to better manage its assets and navigate the complex landscape of airline industry finances during a challenging period.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com