PARIS, FRANCE: Air France-KLM, the Franco-Dutch airline group, has announced that it has signed a definitive agreement with Apollo Global Management, a US private equity firm, to raise €500m in quasi-equity financing for its maintenance activity.
The financing will be provided by Apollo-managed funds and entities, which will subscribe to perpetual bonds issued by a newly created operating affiliate of Air France that will own a pool of components dedicated to Air France’s Engineering and Maintenance (MRO) activities.
The financing will be accounted as equity under IFRS and will be used for general corporate purposes and future components expenditures related to the maintenance activity. The perpetual bonds will have an interest rate of 6.9% for the first three years and gradual step ups and caps thereafter. Air France will have the option to redeem them at any time after three years.
The transaction will not affect the ownership, operational and social aspects of Air France Engineering and Maintenance activity, nor the way Air France uses the components and executes the maintenance contracts. There will be no impact on Air France or Air France-KLM employees’ contracts.
The transaction is part of the group’s overall IFRS equity restoration plan, as announced in February 2023 during the full year 2022 financial results.
Air France-KLM said that the financing will strengthen its balance sheet and liquidity position, as well as support its recovery from the Covid-19 crisis.
Apollo said that it is pleased to partner with Air France-KLM, one of the world’s leading airline groups, and provide a flexible and tailored financing solution for its maintenance activity.
Deutsche Bank AG and Skadden, Arps, Slate, Meagher & Flom LLP are acting as exclusive financial and legal advisors to Air France-KLM. Milbank LLP and Jeantet are acting as legal advisors to the Apollo funds. Apollo Capital Solutions provided structuring and syndication services in connection with the transaction.
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