West Atlantic enters memorandum of understanding tied to refinancing

By Caroline Salls

Pittsburgh, April 9 – West Atlantic AB entered into a memorandum of understanding Tuesday with Lusat Air SL and some major bondholders in connection with group refinancing talks, according to a news release.

West Atlantic said the memorandum of understanding was reached after an offer made by Lusat was accepted by its shareholders and bondholders.

The company said it has agreed to issue new ordinary shares to Lusat, and, as payment for the ordinary shares, Lusat will provide a €20 million equity contribution, conditional to the approval by the bondholders of the written procedure accepting the complete transaction.

Because of Brexit, West Atlantic said the subscription of the new ordinary shares must occur on or around April 10. This will result in Lusat becoming the majority shareholder in the company.

Although the allocation of the shares to Lusat will give rise to a change of control event under the terms and conditions of the bonds, West Atlantic said the bond trustee, based on instructions from the company and the major bondholders, agreed to a temporary and conditional waiver of the company’s obligation to repurchase any bonds until the written procedure has been held and the transaction, including the change of control, has been formally approved by the bondholders.

Of the equity contribution, West Atlantic said €10 million will be used to partially amortize the bonds at par and the other €10 million will be used for capital needs within the group.

“Beside the new equity contribution there will also be synergies and benefit of scale for the group going forward,” West Atlantic chief executive officer Lars Jordahn said in the release.

“This is very positive news for our customers and employees.”

The company said it will call for a bondholders’ meeting by way of written procedure by no later than April 15 in order for the bondholders to approve the transaction, the change of control and the offer from Lusat.

Following approval of the transaction by the bondholders, the company will immediately amortize the bonds with the €10 million portion of the contribution. The remaining claim under the bonds will be transferred to a special purpose vehicle entity, which will issue a new bond by a mandatory exchange corresponding to the remaining claim and will accede assets such as aircraft, the company’s warehouse and rights to payments under lease agreements.

Some of these assets will be repurchased by Lusat for €25 million, which will be used to amortize the new bond issued by the SPV.

The new bond will have a three-year term and will bear interest at a rate of 6% for the first year, 7% during the second year and 8% during the third year.

If the bondholders are not fully repaid from the assets transferred to the SPV, they will have a pledge related to Lusat’s purchase price for the shareholders’ shares, which amount to roughly SEK 270 million to be paid before the equity increase.

Pareto Securities AB has been retained as financial adviser, and Gernandt & Danielsson Advokatbyrå KB has been retained as legal adviser to the company. Mesana Capital has been retained as financial adviser to Lusat.

West Atlantic Group is a Gothenburg, Sweden-based provider of European air freight services.

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