Bain Capital to acquire 16% stake in Icelandair

Bain Capital is to acquire a 16% stake in the Icelandair Group by buying new shares for ISKL8 billion krona (USD66.1 million), the parties announced.

This follows a binding agreement signed on June 23, 2021, whereby Bain Capital will subscribe to 5,659,094,470 new shares in Icelandair Group at a price of ISK1.43 krona (USD0.0081) per share for a total consideration of ISK8,092,505,092 (USD66.1 million).

“The capital increase will further strengthen Icelandair Group’s financial position increasing its capabilities of seizing opportunities in the current unprecedented operational conditions,” Icelandair Group Hf. said in a joint statement.

The parties said the agreement was subject to a shareholders’ meeting of Icelandair Group on July 23, 2021, agreeing to the transaction and thereby waiving shareholders’ pre-emptive rights to the new shares.

It is also conditional on the election of a Bain Capital representative to Icelandair Group’s board of directors. The current board chairman, Úlfar Steindórsson, would step down from the date of the shareholders’ meeting, subject to the transaction’s approval.

The new shares were subject to a 180-day lock-up period that would commence on the date of them being admitted to trading on the Nasdaq Iceland Main Market.

In addition to the new shares, Bain Capital would receive a warrant for subscription rights amounting to 25% of the number of new shares now purchased. The warrant would be exercisable during a 10-day period immediately following the publishing of the company’s Q2 2022 results. The warrant would allow Bain Capital to purchase new ordinary shares in the company at a price equalling the price per share of the new shares plus 15% annual interest.

Icelandair Group President and Chief Executive Officer Bogi Nils Bogason welcomed the anticipated addition of Bain Capital as a new shareholder. “We are pleased to have a leading global investor with deep industry knowledge recognise our efforts and commitment to secure Icelandair’s bright future. We look forward to working with them to bring to fruition the many opportunities we see for Icelandair Group´s winning business model in the post-COVID era, where Iceland, the company’s hub and home, will continue to be an exciting travel destination.”

Bain Capital Credit Managing Director, Matthew Evans, said: “While a fulsome recovery of the global travel and tourism market is likely to take some time, we share the management team’s belief that Icelandair (FI, Reykjavik Keflavik) has a highly competitive business model built for long-term success along with a strong operational track record, making the company well-positioned to capitalise on attractive opportunities arising as the recovery progresses. We are confident our experience across the aviation ecosystem and value-added approach will help grow the company for the benefit of all stakeholders.”

Icelandair has taken several steps over the last 18 months to survive amid the plunge in demand due to the COVID-19 pandemic. In September 2020, it raised ISK23 billion (USD187 million) from a share issue as part of a broader restructuring that included job cuts, a government-guaranteed credit facility, converting debt to equity, aircraft sales, and non-core asset disposals. Earlier this month, it disposed of its in-house tour operator, Iceland Travel to concentrate on its core business of aviation.

At the end of April 2021, the Group reported its operations were still heavily impacted by COVID-19, with capacity down by 92% in 1Q21, resulting in a 73% decrease in revenue and a net loss of USD30.1 million compared to a net loss of USD240.2 million in 1Q20. Total liquidity at the time stood at USD281.9 million.