LONDON – On May 24, the Air France-KLM Group released an announcement advising that they are launching a rights issue to gain €2.256 billion in cash and/or by offsetting claims.

The Rights Issue…

Following new recapitalization measures back in February, Air France-KLM Group have decided to take advantage of the new measures, meaning that they can increase their equity and balance sheet with preferential subscription rights to their existing shareholders, meaning that this additional capital can be brought in either as cash itself or by offsetting any of the group’s on-going claims.

The preferential subscription rights will bring in 1,928 million new shares into the group, which is what will generate €2.256 billion in the capital.

In total, the group will obtain 1,927,902,102 new shares at a subscription price of €1.17 per share, which will come to a total value of €2,255,645,459.34.

Air France-KLM Group have also said that the net proceeds will be allocated to repaying their subordinated bonds that were issued back in April 2021 and held by the French State alongside strengthening the group’s equity.

As the group announced back in February during their full-year 2021 financial results release, they intend to free themselves from the conditions set by the European Commission’s temporary framework by allocating themselves roughly €1.7 billion to the repayment of the “COVID-19 Recapitalisation Aid”.

Commenting on this announcement, Benjamin Smith, the Chief Executive Officer of Air France-KLM Group has said, “The operation we are launching today is the result of the work we have been doing for several months to consolidate our balance sheet, strengthen our financial autonomy and regain strategic and operational flexibility.”

“As the recovery continues and our economic performance recovers, in particular thanks to our ambitious transformation plan and the structural benefits it continues to deliver, we want to be in a position to seize any opportunity in a changing aviation sector and to be able to accelerate our environmental commitments.”

“I would like to thank our main shareholders for their renewed support in this operation, and I am also delighted to welcome CMA CGM to our capital, as a new reference shareholder and industrial partner in our cargo activities.”

As mentioned by Smith, CMA CGM will become a new shareholder for the group and will be an exclusive strategic partner in their cargo activities.

CMA CGM has committed to a transaction of €400 million (including the acquisition of Rights) and will not exceed a total shareholding of 9%.

Alongside CMA CGM, China Eastern Airlines and Delta Air Lines have also committed to participating in Air France-KLM Group’s Rights Issue, however, are both on a cash neutral basis by subscribing to new shares through the sale of part of their Rights, using the net proceeds from selling Rights to CMA CGM.

Overall…

All in all the significant bump in the capital that this will generate for the Air France-KLM Group will mean that they will be able to inject further funds into significant investments such as achieving their carbon neutral goals as well as new routes and fleet.

It will be interesting to see how much this will help the Air France-KLM Group.