Air France-KLM Group signs new €7 billion financing agreement

By Sarah Lizee

Olympia, Wash., May 7 – Air France-KLM Group signed a €7 billion financing agreement that consists of a €4 billion one-year loan guaranteed by the French State and a €3 billion four-year subordinated shareholder loan granted by the French State.

The one-year loan, with a 90% guarantee by the French State, was syndicated by nine banks, with Credit Agricole CIB, HSBC France and Natixis as mandated lead arrangers and bookrunners, Natixis as documentation and facility agent, Deutsche Bank Luxembourg SA, Societe Generale and Banco Santander Paris Branch as senior mandated lead arrangers and BNP Paribas, Credit Industrial et Commercial and Credit Lyonnais as mandated lead arrangers.

It has one- or two-year extension options and a coupon excluding the French State guarantee cost at an annual rate equal to Euribor plus a margin of 75 basis points in the first year, 150 bps in the second year and 275 bps in the third year, subject to a 0% Euribor floor.

The one-year loan carries a cost of the guarantee granted by the French State initially equal to 0.5% of the total amount of the loan, and which will step up to 1% for each of the second and third years.

It requires a mandatory partial early repayment of 75% of the any net new money raised by Air France-KLM or Air France from financial institutions or through debt capital markets, subject to some exceptions, and a mandatory total early repayment notably in case of change of control of Air France-KLM or Air France.

The subordinated shareholder loan carries two consecutive one-year extension options exercisable by Air France-KLM and a coupon payable annually or capitalizable at the discretion of Air France-KLM at a rate equal to 12-month Euribor plus a margin of 700 bps for the first four years, 750 bps for the fifth and 775 bps for the sixth, subject to a 0% Euribor floor. The rate will be increased by a 5.5% step up under some circumstances.

This loan is subordinated to the one-year loan and, in the event of receivership or liquidation, to all the Air France-KLM senior bond and bank debt, without prejudice of an incorporation of all or part the outstanding shareholder loan in the company’s shareholder equity.

The company has undertaken not to pay dividends until the two loans have been repaid in full.

Air France said that following the new financing it will reimburse €1.1 billion for the revolver drawn in March and will terminate it.

The company said it entered the financing agreement to weather the pandemic crisis and prepare for the future.

The airline is based in Roissy, France.

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