Air France-KLM has signed “a definitive agreement” with private equity firm Apollo Global Management for a EUR500 million euro (USD562 million) capital injection, which will go to one of its engineering and maintenance units.
The global alternative asset manager’s financing will be raised for Air France Industries-KLM Engineering & Maintenance, through which “an operating affiliate of Air France will own a pool of components dedicated to Air France’s Engineering and Maintenance activities,” the group explained.
Apollo will subscribe to perpetual bonds “issued by this ad hoc operating affiliate” bearing an interest rate of 6.9% for the first three years, with gradual step-ups and caps to be applied thereafter, the company said. Air France will have the chance to redeem them at any time after three years.
The funding “will incur no change of ownership, operational, and social aspects” in the MRO unit, nor will it have any impact on maintenance or employees’ contracts, the Air France and KLM Royal Dutch Airlines parent stressed.
Air France-KLM and Apollo Global Management entered into a similar recapitalisation measure last year, when the private equity firm invested the same-sized sum in the company to help repay French state aid. The latest transaction is part of the group’s overall equity restoration plan, the company said. Deutsche Bank and New York-based law firm Skadden, Arps, Slate, Meagher & Flom are acting as financial and legal advisors to Air France-KLM.
In its own statement, Apollo said that the “bespoke transaction, part of Apollo’s high-grade partnerships,” will provide the airline with “a custom capital solution to further strengthen its balance sheet and support the future purchase of components related to maintenance activities.” It confirmed that “Apollo funds, affiliates, and clients” have now committed EUR1 billion (USD1.12 billion) to the company in total.
