Private equity firm Apollo Global Management is to inject EUR500 million euros (USD501 million) into Air France (AF, Paris CDG) as part of recapitalisation measures announced in February 2022.
The investment – expected to close later this month - will go into an ad-hoc operating affiliate of Air France that will own a pool of spare engines dedicated to the airline’s engineering and maintenance activities, according to the indefinite agreement between parent Air France-KLM and Apollo announced on July 13, 2022.
“This structure will incur no change of ownership, operational, and social aspects of Air France engineering and maintenance activity,” the parties confirmed in a statement.
Still, the investment could help finance the acquisition of additional spare engines to support Air France’s fleet renewal programme in the future, they stated.
Under the agreement, Apollo-affiliated entities would subscribe to perpetual bonds issued by the Ad hoc operating affiliate. The investment would be accounted for as equity under International Financial Reporting Standards (IFRS).
The parties said the proceeds would enable Air France-KLM and Air France to further redeem French state perpetual bonds, granted during the pandemic in accordance with European Commission state aid rules.
In addition, Air France-KLM would benefit from lower financing costs as a result of the transaction. “The perpetual bonds will bear an interest rate of 6% for the first three years, and gradual step-ups and caps would be applied thereafter. Air France would have the ability to redeem the bonds at any time after year three,” the statement read.
