Etihad bondholders put airline on notice with debt revamp - sources

Air Berlin

21/05/2020 12:21

By Davide Barbuscia
    DUBAI, May 21 (Reuters) - Owners of $1.2 billion in debt
issued by Etihad and other airlines it partly owned have given
the struggling Abu Dhabi carrier an ultimatum to agree to a
restructuring or potentially face legal action, two sources
close to the situation said.
    The move is the latest turn in the unravelling of Etihad's
strategy to embark on global partnerships with airlines, the
most high profile of which have since gone bankrupt.
    A steering committee of debtholders, comprising largely
local as well as international investment funds, submitted a
proposal to Etihad about a month ago asking the carrier to agree
to restructure the two bonds, due in September 2020 and June
2021, but have yet to receive a response, the sources said.
    The proposal, which has not previously been reported,
involves a maturity extension of the debt by up to three years
but would require Etihad or its owner, the oil rich Abu Dhabi
government, to guarantee the repayment of the underlying loans
that were made to airlines partly owned by Etihad such as Air
Serbia and Air Seychelles. 
    Etihad issued the debt in 2015 and 2016 through an
Amsterdam-based special purpose vehicle, EA Partners (EAP),
which then distributed the money to Etihad and the other
airlines.
    The original deal envisaged each airline paying off its own
portion of the debt, according to the debt documentation, a copy
of which has been seen by Reuters.
    Under the latest proposal, creditors would write off the
portion of the debt owed by bankrupt carriers Air Berlin and Jet
Airways, equivalent to $344 million, the sources said. 
    Debt owed by Alitalia, the Italian carrier, would be
included in the proposed refinancing because Etihad agreed to
cover it under a private "debt assumption agreement" signed by
the two airlines in 2016, the sources said.
    If Etihad does not agree to the proposal, the bondholders
via EAP will make a claim in ongoing bankruptcy proceedings
involving Alitalia and Air Berlin. In this way, Etihad may be
required to honour Alitalia's debt, the sources said.
    Etihad declined to comment. EAP, Alitalia and the Abu Dhabi
government did not respond to requests for comment.
    Etihad has previously told EAP the debt assumption agreement
is not enforceable against the company, according to an EAP
stock exchange disclosure last month.
    Even before the coronavirus froze most air traffic, the
notes had lost more than half their value after three of the
borrowing airlines went bankrupt.
    For Etihad, which has piled up billions of dollars in losses
since 2016, refinancing the debt could mean delaying repayments
worth hundreds of millions of dollars while it deals with the
fallout from the coronavirus crisis.

 (Reporting by Davide Barbuscia, additional reporting by Yousef
Saba; editing by John O'Donnell and Carmel Crimmins)
 ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters
Messaging: davide.barbuscia.reuters.com@reuters.net))