Russia’s UTair suggests debt-to-equity swap

UTair (UT, Khanty-Mansiysk), now in its third year of trying to restructure its RUB60 billion rubles (USD833 million) worth of bank loans, will ask its shareholders at a meeting set for July 22 to consider a debt-to-equity swap to ease another segment of its debt pile, it has outlined in a statement. The move would allow the long-struggling carrier to reduce its debt burden by 12%, a source familiar with UTair’s debt restructuring told Russia’s RBC TV channel. It would involve its majority (50.112%) owner, AK-Invest, which is controlled by state-owned oil and gas firm Surgutneftegaz, and two more companies, Surgutneftegaz unit Neft-Consulting and UTair subsidiary UTair-Engineering, to take part in the swap. The three companies – all of which, like UTair, are based in Khanty-Mansi Autonomous Okrug in Western Siberia – are UTair creditors and will convert these debts into shares during the issue of additional shares. “The additional issue shares would be placed in favour of the existing lenders […] and the airline’s debts to these lenders would be converted into shares,” the statement issued on June 4 explained. The source told RBC that the carrier would issue 4.2 billion ordinary shares to them for a total of RUB13.6 billion (USD189 million) of debts. As UTair itself put it in its statement: “Conversion of debts into shares, in which the majority shareholder of AK-Invest and other lenders will participate, is a necessary stage in a comprehensive debt restructuring. This will allow UTair to meet the requirements of its creditor banks, significantly reduce its debt burden, and improve its credit and financial metrics.” UTair’s long-term and short-term liabilities decreased by 2% during 2020, to RUB111 billion (USD1.55 billion), according to its financial statements. According to the RBC source, if the shareholders approve the new share issue, this may decline by a further 12%. “We are entering the final stage of restructuring,” underlined General Director Andrey Martirosov. “And for its successful completion, it is extremely important to secure the approval of the shareholders, which they have always provided for the backbone airline of Russia, which is of strategic importance for the northern regions and for the country’s oil and gas sector.”