airBaltic (BT, Riga) has said it expects to bolster its liquidity and financial stability, facilitating investments in fleet expansion and modernisation, after pulling in EUR840 million euros (USD901 million) worth of orders for an issue of a steep 14.5%-yield junk bond priced at EUR340 million euros (USD364.7 million).
The issue of the five-years-and-three-months senior secured bonds is the biggest corporate bond offering from Latvia and, according to Bloomberg, the highest coupon rate seen in the European high-yield bond market since September 2023. Fitch has assigned airBaltic's planned senior secured EUR300 million (equivalent) bonds an expected long-term rating of 'B(EXP)' with a Recovery Rating of 'RR3'.
In a statement on May 7, the Latvian flag carrier said the transaction received strong interest from international and local investors following an eight-day roadshow, as well as from the Latvian state. More than 100 global institutional investors from 20 countries participated, leading to an oversubscribed order book exceeding EUR800 million (USD858 million). Among them, the Latvian government bought EUR50 million (USD55 million) of the EUR340 million (USD374 million dollar) issue.
President and CEO Martin Gauss confirmed that the proceeds from the placement would refinance the airline's previously issued EUR200 million (USD214 million) bond, which as ch-aviation previously reported matures in July 2024. The financing will also help repay Brussels-approved Covid-era state loans received in 2020 and 2021, totalling EUR340 million (USD365 million).
Gauss said airBaltic continues to look towards a probable initial public offering (IPO) later in the year. Repaying the debts is a prerequisite for the listing on the Nasdaq Riga stock exchange, planned for the end of the second half of this year.
Settlement of the bonds is expected to take place on May 14, and the bonds are expected to be listed on Euronext Dublin stock exchange.
This is airBaltic's second attempt at the bond sale. In October, it had to postpone a planned junk sale due to market uncertainties. However, with parliamentary approval, the Latvian government is poised to assist by purchasing up to EUR136 million (USD146 million) of the debt. Transport Minister Kaspars Briškens recently indicated the state could buy the bonds alongside private investors under the same terms. The Latvian state holds 97.97% of airBaltic's shares.