Avia Solutions launches consent bid for 7 7/8% notes due 2024

By Sarah Lizee

Olympia, Wash., July 7 – Avia Solutions Group plc unit ASG Finance DAC launched a consent bid for holders of its $300 million 7 7/8% guaranteed notes due 2024 (ISIN: US00217AAA43), according to a London Stock Exchange notice.

The company said it expects that the Covid-19 pandemic will negatively affect the group's financial results and operations this year and possibly through 2021.

“Based on current forecasts and expectations for the aviation industry, normal operations are unlikely to commence until at least 2022,” Avia said in the notice.

The group’s ACMI business line, the most cash intensive segment within the group, has been most severely impacted by the current situation. Therefore, in order to help the group to manage the overall business in the current environment, the issuer requested that noteholders consider and agree to the modification of some terms and conditions of the notes for a predetermined 12-month relaxation period.

The relaxation period would allow the group to preserve liquidity rather than use current cash reserves for repayment of a single creditor subset, and protect and ring-fence the rest of the group from certain issues that the ACMI business could face in the current market environment within the relaxation period.

Avia said that in order to support the proposals, it will do the following:

• Limit its debt to permitted debt only during the relaxation period, and further limit some types of permitted debt to the incurrence of no more than €100 million in aggregate;

• Agree to the inclusion of a new minimum liquidity covenant, which would require the issuer to maintain cash and term deposits, calculated as the credit balances on the issuer’s cash bank accounts and term deposits, minus amounts overdrawn on the issuer's cash bank accounts, of a minimum of €25 million at all times during the relaxation period, with the new minimum liquidity covenant to have a cure period of 15 days;

• Limit its ability during the relaxation period to invest in or enter into an asset sale with Avion Express or Smartlynx or their subsidiaries, to either investments or asset sales (not related to a capital lease) of less than €30 million in aggregate, or asset sales related to capital leases on arms' length terms in the ordinary course of business;

• Limit its ability to make any restricted payment or permitted investment that directly or indirectly transfers or returns value to the permitted holder during the relaxation period;

• Limit its ability during the relaxation period to invest in any restricted subsidiary that is not wholly owned, directly or indirectly, by the parent guarantor in order to prevent (i) the funding of dividends or distributions by such restricted subsidiary or (ii) the direct or indirect transfer or return of value to a minority holder of the relevant restricted subsidiary's equity interests via restricted payments or permitted investments; and

• Pay a 0.1% early consent fee to noteholders voting in favor of the proposals on or prior to the early consent deadline.

Apart from the early consent fee, no other payment will be paid or has been paid to noteholders in connection with the consent solicitation.

The issuer said that holders of 44.86% of the notes have indicated that they intend to vote in favor of the extraordinary resolution.

The early consent deadline is 11 a.m. ET on July 16.

The bid will expire at 5 a.m. ET on July 27.

A meeting in London has been set for 5 a.m. ET on July 29 for holders to consider and approve the proposals.

BNP Paribas (+33 1 55 77 78 94, liability.management@bnpparibas.com) is the solicitation agent, and Lucid Issuer Services Ltd. (+44 20 7704 0880, avia@lucid-is.com) is the information and tabulation agent.

Avia Solutions is an aerospace company with headquarters in Cyprus, but most of its operations are in Lithuania.

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