AirBaltic says 25 percent loan was its only remaining option
Estonia AirBaltic’s management says a loan carrying 25 percent interest was the only option left for the airline, ERR reported. The company’s new business plan is intended to make it independent of regular state support.
The interest rate is very high, but AirBaltic executives said it was the best short-term loan available on the market. The agreement is not yet final. Existing bondholders and shareholders are due to approve it on September 11, and they will also have the opportunity to invest additional funds in the company.
Latvia, AirBaltic’s largest shareholder, may participate on the same terms as private investors. Under a decision by the Latvian parliament, the state can invest up to 30 million euros.
Under the agreement with new investors, AirBaltic would receive 180 million euros immediately after existing creditors give their approval and a further 77 million euros after certain conditions are met.
Because AirBaltic keeps its financial arrangements confidential, it is not known what other conditions the investors imposed in addition to the 25 percent interest rate. Chief Executive Erno Hilden said in a press release that the additional funding was needed to secure liquidity, implement changes under the new business plan and ensure that flights continue.
The investors are London-registered investment management firm Polus Capital Management and the Israeli investor group Klirmark Capital 4.
Latvian Prime Minister Andris Kulbergs has said that AirBaltic’s future depends on its creditors rather than the Latvian state. Transport Minister Rihards Kozlovskis said the government trusted the company’s current management and supervisory board to meet their objectives and that changes should follow sound corporate governance principles.
AirBaltic’s new business plan assumes that the company will be able to repay the loan and interest by the end of next February. The money is needed to refinance existing obligations, repair and maintain aircraft, and pay airport charges.