AirBaltic Bond Yields Hit Record High
Yields on AirBaltic's €380 million 2029 bonds surged to 176% on Wednesday. The spike occurred as the airline prepared for a critical creditor vote on new financing.
Bond yields on AirBaltic's 2029 debt reached a record high of 176% on Wednesday. This move drove bond prices to their lowest levels since issuance. The market reaction signals intense anxiety ahead of Friday's investor meeting. The vote will determine the fate of emergency financing for the Latvian carrier.
AirBaltic is majority-owned by the Latvian government and backed by Lufthansa. The airline serves as a test case for the broader market. Weaker operators face the highest pressure from soaring jet fuel prices linked to the Iran conflict. These costs are difficult to pass on to consumers.
Engine Shortages Ground Fleet
The carrier has faced significant engine shortages. These issues have grounded part of its all-Airbus fleet. The delays also pushed back plans for a stock market listing. The Iran war added further strain to the airline's operations.
AirBaltic suspended lucrative flights to Dubai due to the conflict. This decision swelled its fuel bills. The airline now faces concerns about its ability to refinance or repay existing debt. Ryanair warned that some rivals may struggle to survive the winter season.
Super-Senior Debt Proposal
AirBaltic will ask bondholders to approve a plan to raise up to €257 million. The funds would come from new super-senior debt due in 2027. The proposal requires approval from more than 75% of attendees. The airline lowered the quorum to over 25% after an August meeting failed.
The new bonds would take priority for repayment from collateral. This collateral includes eight aircraft and seven engines. Existing notes due in 2029 would fall to third priority. Analysts cited this subordination as a key driver of the Wednesday yield spike.
State Support Remains Uncertain
Credit fund Polus Capital has committed to subscribe at least 50% of the new notes. Israeli investment firm Klirmark Capital also supports the plan. The Latvian government supports stabilization efforts but has not committed additional temporary funding. Fitch noted that EU state aid rules make large equity support problematic.
No public Plan B has been committed by the state or others. This absence of a backup mechanism creates uncertainty. GN auto markets/bonds: bond yields data reflects the current risk premium. Investors are demanding higher compensation for the increased credit risk.
