The state-backed carrier, 88% of whose shares are state-held, laid out a stopgap funding package in a Thursday filing to bridge it through a full restructuring. The plan would start with an initial €180 million issue and could scale to €257 million. Polus Capital pledges to acquire at least half of the new super senior notes, while Polus and Klirmark will underwrite whatever amount other bondholders decline. The interim borrowings are meant to be refinanced once the broader overhaul is completed.
The price tag is steep. The new paper carries a 25% per annum coupon, and the two credit funds would be paid fees equivalent to roughly €30 million, issued as extra new super senior bonds. A second tranche of financing would depend, among other milestones, on Air Baltic reaching an agreement with stakeholders on the restructuring.
Investors who join the new money raise would be able to roll part of their 2029 notes into higher ranking "uptiered" bonds. The package also includes a tailored exchange that would let Klirmark convert its current holdings into those uptiered securities. Holders of the 2029 bonds who do not participate would be subordinated to Klirmark, Polus, and the rest of the super senior creditors when it comes to repayment. The new super senior debt would come due on Feb. 26, 2027.
Air Baltic has already borrowed €30 million on a short term basis from the Latvian government after being hit by higher fuel costs following war breaking out in the Middle East. Latvia holds around 13% of the airline's existing bonds and has the option to put in new money for super senior notes. Parliament in Riga approved a package last week allowing the state to buy as much as €30 million in new Air Baltic bonds.
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A Polus spokesperson declined to comment, and Klirmark representatives were not available. A vote by bondholders on the interim financing is scheduled for Sept. 11.
