Air France to Sell $2.4 Billion of New Shares to Reduce Debt

Air France-KLM plans to repay a portion of the state aid it received during the Covid-19 crisis in order to shore up its balance sheet.

The Franco-Dutch airline said in a statement Tuesday that the proceeds of the planned rights issue will be used to repay bonds issued in April last year. The period is from May 27 to June 9.

Chief Executive Officer Ben Smith said in the statement that they want to be in a position to seize any opportunity in a changing aviation sector.

Air France-KLM will be closer to completing its plans for a 4 billion-euro capital increase as it seeks to repay debt in line with European Union requirements on state funding, which currently bar the airline from participating in the consolidation of the industry that has been marred.

Air France said this week that it is in talks with Apollo Global Management for a 500 million-euro capital injection.

Government Stakes

Air-France-KLM said that the share-sale plan, improved earnings and other measures will allow the company to repay the French state aid in the coming quarters. The financing cost of the company will be reduced.

Air France-KLM said that the French state will participate in the rights issue to keep its stake unchanged. The Dutch government wants to keep its 9.3% stake if it gets approval from the country's parliament on time.

The shipping giant plans to invest as much as 400 million euros in the transaction to take a stake of as much as 9% of the airline as part of an air-cargo alliance announced earlier this month.

China Eastern Airlines and Delta Air Lines will see their stakes in the Franco-Dutch carrier halved as they commit to participate in the rights issue on a cash neutral basis. Some of their subscription rights will be sold.