Etihad Adds Air Berlin
Support as Bondholders
Reject Swap Offer
German airline’s creditors rebuffed delay in repurchase date
Abu Dhabi carrier gives backing to new convertible-bond sale
By Luca Casiraghi and Richard Weiss (Bloomberg) --
Etihad Airways PJSC increased its financial support for Air
Berlin Plc after the unprofitable German carrier failed to
convince bondholders to wait an extra nine months for
repayment.
The Abu Dhabi airline will back 53.7 million euros ($57 million)
of new convertible bonds, according to a statement late on
Friday. The move came after 99 percent of Air Berlin’s
convertible-bond holders, excluding Etihad, rebuffed a debt
exchange that would have let the German carrier delay
repayments due as soon as March 6.
The snubbed bond-swap adds to Air Berlin’s reliance on Etihad,
its largestshareholder, even as the Abu Dhabi airline reviews
investments amid the departure of its chief executive officer.
Etihad has at least 1.5 billion euros at risk in Air Berlin, after
pumping in cash and extending credit lines to help keep the
German carrier flying.
“Creditors are unsure whether Etihad will continue to back Air
Berlin,” saidMarc Pierron, an analyst at Spread Research in
Lyon, France. They therefore “decided to not participate in the
exchange, which was removing the safe option of repayment at
par next month.”
Air Berlin plans to sell new bonds by Wednesday, said
spokesman Tobias Spaeing. He declined to comment on the
airline’s relationship with Etihad. An Etihad spokesman said he
wasn’t immediately able to comment on the Air Berlin bonds.
The Berlin-based carrier’s shares were little changed at 60
cents in Frankfurt trading on Monday, close to the record low
and down 33 percent in a year. Its March 2019 bonds are
quoted at 98 cents on the euro, according to data compiled by
Bloomberg.
Air Berlin offered bondholders the opportunity to swap 140
million euros of 6 percent convertible notes maturing in March
2019 for 8.5 percent notes due the same month. Holders of the
original notes can demand repayment at face value on March 6.
The so-called put-option date for the new bonds is Dec. 29.
The exchange was accepted by Etihad, which holds 40 million
euros of the original notes, and by holders of another 1.3 million
euros. That leaves Air Berlin potentially having to repay as
much as 98.7 million euros to the other bondholders in two
weeks’ time.
The German carrier will issue 125 million euros of new
convertible bonds to cover the exchange and the possible
March 6 bond payment. HSBC Holdings Plc will buy 57.3 million
euros of the new notes, with Etihad repaying any losses
suffered by the bank through a derivatives contract, according
to Friday’s statement.
Etihad, which owns 29 percent of Air Berlin, said last month that
it will “adjust” its strategy of taking stakes in carriers, without
providing further details. Chief Executive Officer James Hogan
will depart later this year after overseeing investments in airlines
including Alitalia SpA and Virgin Australia Holdings Ltd.