- Latam Airlines Group priced $2.25 billion in bankruptcy exit financing from a group of lenders last week. The debt includes $450 million in five-year senior secured notes and $700 million in seven-year notes both at a fixed rate of 13.375 percent, and a $1.1 billion five-year term loan B at a variable rate of either 850 basis points over an alternate base rate (ABR), or 950 basis points over the adjusted secured overnight financing rate (SOFR). Latam CEO Roberto Alvo said the airline now intends to exit its U.S. Chapter 11 restructuring on November 3 with roughly $2.2 billion in liquidity and 35 percent less debt than it had when it filed in May 2020.
- Here’s some rare good news about Aerolineas Argentinas: The national government’s 2023 budget shows subsidies to the airline will decline by $102 million from this year’s total. Sounds like things are improving! The bad news: That still amounts to $412 million. The history of Aerolineas reads like a financial horror show, with frequent stomach-churning subplots featuring labor strife, dismal service, and examples of mismanagement (remember when a previous owner ordered Airbus A380s?). Generating traffic isn’t the problem. The carrier expects to move 11 million people this year, and 13 million next year. That’s in line with the volumes it was handling just before Covid. One tailwind for Aerolineas is the departure of Latam from the Argentine market. But the headwinds are well-known, severe, and chronic — uncompetitive wages, overstaffing, political interference, steep currency depreciation, recurrent financial calamities, and so on. The traffic split across two Buenos Aires airports, furthermore, makes it difficult to develop a connecting hub at either one. In any case, Aerolineas is investing in new planes and eyeing an increase in tourism while working to capture business traffic from key industries led by the oil sector. It’s recently been opening new routes to Brazil.
- Aeromexico has launched a tender offer for its remaining shares on the Bolsa Mexicana stock exchange. The airline is offering cash for the 11.5 million shares outstanding on the stock exchange. Once the tender is complete on November 8, Aeromexico plans to delist from the Bolsa Mexicana.
- Gol closed an $80 million engine financing with Apollo PK AirFinance. The debt finances nine engines that will be delivered from CFM International by the end of the year. The five-year debt has an interest of roughly 7 percent, and covers the full capital costs — minus pre-delivery payments — of the engines.
- And Embraer is again tapping export credit financing to get its planes out the door. Last week the Brazilian airframer closed two deals: A $100 million deal with UK Export Finance for supplies Embraer makes in the country, and a roughly 670 million Brazilian reais ($126 million) transaction with Brazilian export credit agency BNDES for six E175 aircraft bound for SkyWest Airlines. Both BNDES and UK Export Credit did a limited number of deals for several years owing to a corruption investigation involving the former, and an investigation into the latter’s dealings with Airbus.
- Surf Air Mobility and turboprop lessor Jetstream Aviation Capital are deepening their relationship under a new financing deal and powerplant order. The lessor will provide up to $450 million in financing to support Surf Air Mobility’s growth, and has signed a letter of intent for up to 250 hybrid or electric powertrains from the company. Jetstream already is a “long-standing” partner of Southern Airways Express, which has agreed to merge with Surf Air Mobility as part of its SPAC public listing. Surf Air Mobility aims to offer the first certified hybrid-electric aircraft powertrain on the market with plans to introduce it commercially on Southern’s fleet of Cessna Caravan aircraft. The technology is designed to be retrofitted onto existing aircraft.
Edward Russell
October 17th, 2022