Air France issues bonds convertible into shares for 300 million euros

By Silvia Aloisi

PARIS (Reuters) – Air France-KLM said on Wednesday it was issuing subordinated bonds convertible into new shares for 300 million euros ($312 million) to strengthen its capital and pay back state aid, sending its shares plummeting.

The shares plunged 13% shortly before the market close as the issue potentially dilutes current shareholders in Air France if the bonds unless they buy into it.

Air France said in February that it was considering options for a capital raising of up to 4 billion euros, including a rights issue and quasi equity debt issues. The operation launched on Wednesday is part of that plan.

“This transaction marks a further step in the group’s initiatives to accelerate the repayment of the French state aid, continue to support the strengthening of equity capital, and help optimise financial costs,” the company said in a statement.

The bonds, which can also be exchanged with existing Air France shares, were offered through a placement to qualified investors, the airline said.

In a later statement, it said bookrunners had received demand indications “well above” the 300 million euro nominal value. Final terms of the offering, including prices, will be communicated after the stock market close.

Air France-KLM received 10.4 billion euros in support in 2020 when the coronavirus pandemic hit, including through direct state loans from France and the Netherlands – its two biggest shareholders at the time.

The airline said shipping company and existing Air France investor CMA CGM, which owns a 9% stake, had participated in Wednesday’s placement pro-rata to its current shareholding.

Neither the French or the Dutch state were taking part in the bond issuance, according to Dutch finance minister Sigrid Kaag.

“The company is not aware of any subscription intention from its other main shareholders,” Air France said.

France has a 28.6 % stake in the airline.

In a letter to parliament, Kaag said that the Dutch state’s own holding of 9.34% would be diluted to 8.66% if the new bonds are converted into shares.

($1 = 0.9613 euros)

(Additional reporitng by Tassilo Hummel and Valentine Baldassarri, Editing by Louise Heavens and David Gregorio)