Two international funding vehicles - Etihad Airways Partners I BV and Etihad Airways Partners II BV - have turned down Air Serbia’s proposal to reduce the value of two loans provided to the Serbian carrier, worth 52.9 million US dollars and 63 million dollars, by 82%. In a statement, the two funds said, “The Steering Committee considered the Air Serbia repayment proposal to be unacceptable given that such proposal will permanently reduce, by approximately 82%, the amount payable by Air Serbia under the Air Serbia Loan Agreement and, consequently, reduce the amount available to the issuer [Etihad Partners] to pay to the noteholders. Noteholders have instructed the issuer to advise Air Serbia in writing that it rejects in full the Air Serbia Repayment Proposal and further that the issuer expects Air Serbia to pay all amounts under the Air Serbia Loan Agreement when they fall due in accordance with the terms thereof”.
In September 2015, Air Serbia concluded a loan for 52.9 million US dollars from EAP I BV which matures next month with an annual interest rate of 6.96%. Furthermore, it finalised a loan for 63 million dollars with EAP II BV on May 20, 2016, which matures in June of next year. Air Serbia made its most recent interest payment on the loans in March. It requested for the value of the loans to be reduced by 82% “in order for the borrower to 1) continue to operate until the repayment date, and 2) generate and accumulate the necessary cash to make such payment once trading activities recommence”. Etihad Partners has also rejected a similar proposal made by Air Seychelles, which is also part-owned by Abu Dhabi-based Etihad Airways.
The Etihad Partners funding vehicles have also taken Etihad Airways to court over the repayment of Alitalia’s debt. The Emirati airline issued bonds in 2015 and 2016 through the Amsterdam-based special purpose vehicles, Etihad Partners, which then distributed the money to Etihad and other airlines it owned at the time. The state-owned Abu Dhabi carrier spent billions of dollars on airline acquisitions that failed to deliver expected returns. Some of the airlines that Etihad went into partnership with have since gone bankrupt and the bonds issued in 2015 and 2016 now trade at around 45 cents. Air Serbia has attempted to restructure its debt with Etihad Partners as a result of an income shortfall caused by the coronavirus pandemic.
Comments
#jfk #kvo #ini
I would be worried with a management:
- capable of taking a loan at such a high interest rate. (Remember that Air Serbia did not get the full amount, but they had to pay a 5%+ fee for it (?!?!)
- capable of sending such a letter. You either declare bankruptcy, and restructure your debt (e.g. the famous Chapter 11 in the US), or you cough up the money. The way they are acting is almost like games for preschool.
But in all fairness, many airlines including OU and JU have gone to the creditors, lessors, suppliers etc and asked for reduction of fees, deferral of payments, delaying of aircraft deliveries and so on... And have been more or less successful.
So it really suprises me as to why Etihad Partners would not cooperate in some way?? Maybe 82% is too high but some counter offer would be expected during these times.
And does anyone know what happens if JU just forgoes on this payment in September?
https://www.reuters.com/article/us-etihad-airways-debt-restructuring-exc/exclusive-etihad-bondholders-put-airline-on-notice-with-debt-revamp-sources-idUSKBN22X1CS
This is just one piece of puzzle.
100 million is not for sure, but probably is 50 million acording to the JU fanboys.
Air Serbia is just a piece of it and despite some wishes here will continue to exist further.
During the last 7 years, the biggest mistake was not to renew the fleet first and then focus on expansion. Every single airline in the region did it. An ageing fleet will remain an issue. You can't just be loss making since the beginning, still fly with planes since the fall of Yugoslavia and have a loan with such a high interest. Also, anything related to EAP or EY is horrendous. Let's see what and how Air Serbia will proceed but the state will end up paying dearly for this, instead of giving this money to the ones in need.
EY made a fantastic deal for themselves with the government...
LOL the BS we read here!
But even the most fanatic fanboys must have realised by now that the business model of the company is loss making.
So there will be zero investigation about the deals it made with EY, the land or the interest rates.
Remember that this is Balkana.
Just my2cents
The credit was turned into equity .
The company Air Serbia owes the loan. Not the stock owners. The stock owners can decide to not infuse any new funds to it. Nobody can force them to.
That means that debt has to be paid completely, but at a later time .
Also while in the debt moratorium the airline will not get any funding from the international financial market ( private Investors ) .
In that time it only can get its funding from a government .
Thai Airways for example is an airline under bancruptcy protection .
Next month, if they fail to pay interest or the repayment, they are in default. The financial statements of EA Partners I B.V. disclosed the following about that situation:
'The Deposits are also non-derivative financial fixed assets. These come available as
collateral each IPD if and when one of the Borrowers incurs a default.'
In most cases the deposits/collateral are the shares of the company. Given the importance of the company to the Government of Serbia, the company will not end up in the default situation. Therefore the company will try to restructure the loan (discuss the interest % or maturity date of the loan) or the Government will repay the loan and find alternative funding afterwards.
Given the excellent financial performance of the company, it should not be so hard to find new lenders, should it?
112 million USD debt to Etihad Partners + debts to banks in Serbia
40 million USD to be payed to Etihad in case they brake contract.
6 planes more than 30 years old
High leasing costs (more than 30 million EUR per year) for rest of the fleet.
Corona (2 months did not fly + modest number of flights and LF after that)
Serbia is not "a step away from the highest credit rating" - actually far from that.
Some people post ridicilous things like that and when others correct them, then we hate Serbia and JU and Serbs and what not.
How about you post accurate facts, so we don't have to "hate you"?
So now to the facts - which I can speak to since I was with Etihad during the time these loans were actioned across all of the partner airlines.
In JU's case, neither the CEO nor CFO could enter/signoff into these loan agreements, because the amounts in question exceeded their delegated levels of authority. It required approval from both of JU's two-tiered governing structure - firstly by the Supervisory Board and secondly, by the Shareholder's Assembly - both of whom are majority represented by the Government of Serbia.
The Chairman of the Supervisory Board at that time was Sinisa Mali and the Chairman of the Shareholder's Assembly at that time was Luka Tomic.
Dane Kondic was not involved in any of the decisions regarding these loans and James Hogan was only one of 9 members of the Supervisory Board (5 from the Govt of Serbia and 4 from Etihad), who unanimously agreed to accept both loans and their terms, while the Shareholder's Assembly subsequently also approved both loans and their terms - which in Serbia, is THE main legal and binding body for major decisions taken on behalf of the company.
And, to satisfy the naysayers that certain people should be investigated/arrested, a simple examination of the Supervisory Board papers for the minutes approving this loan and who signed off, should put to rest any doubts around where and with whom, responsibility for this loan lies with.
Lastly, what might be of interest to some people, is that Sinisa Mali as the Chairman of the Supervisory Board, made a personal visit to Abu Dhabi to meet with senior EY Finance people at that time in order to finalise the finer details of the second loan agreement. He was the only person from JU to make that visit.
So there is no cloak of secrecy here. A simple look into the approved minutes of both the Supervisory Board Papers and the Shareholder Assembly Papers from that time, will reveal all. They are a matter of public record and if I understand correctly, Serbia has a Freedom of Information Act that governs all public enterprises, so anyone can request these - which should satisfy the curiosity of many on this blog and set the truth free !
As someone who is not from Serbia, I wonder why you are so obsessed with this airline and country. Don't see your distinctive comment style on any other news other than Serbia.
If it hasn't / wasn't able to "generate and accumulate the necessary cash" over the past 5 years in which to repay this loan (knowing that this day was coming) while it was crowing about making profits every year over the past 5 years and is now saying that due to the crisis of the past 5 mths, it needs more time - then sadly, it has by its own admission, admitted that it is insolvent and that the business is unable to generate sufficient cash to meet it's liabilities.
The business is as good as dead and surviving on life support provided by generous and supportive govt handouts from year to year. The business will die as soon as the govt stops with the handouts; OR the EU says enough: OR there is a change of Govt. What is however certain, is that this is not sustainable over the long term.
This has to be one of (if not) THE most expensive airline projects ever initiated for an airline of this size. Think of how much startup capital Aegean or Wizz Air had not that long ago and what either would be today if they had (back then) what Air Serbia has had thus far ....
Mind boggling .....
Mali and co. have much to answer for. What's worse, he's in an even more dangerous position nowadays, given that he is in control of the purse strings as the Finance Minister. God only knows what coverups will be put in place to sweep up his own mess.
After 6 years since their start, both airlines were significantly bigger and cash positive - something which after 6 years, JU is not
Maybe it hurts but it is reality.
When corona is over in a year or two new airline could be started by the government.
We don't want a second Adria
Let's see what will happen with the Sukhoi deal.
Similar to JU, Malév also was also a unprofitable company with huge losses. MA also had an excellent, European coverage with double daily flights to many European cities.
It was given to the Russians and they destroyed it.
That would be pure socialism but it is possible .
Governments actually have more power than people nowadays think .
The lenders will cooperate with the government and finally accept some debt relief .
There is the possibility that after the debt memorandum the airline gets partially or fully privatized and debt gets swapped into shares .
After a couple of years think about starting a new airline with a new name.
JU will become a force to be reckoned with. Just remember where LO was back in 2004-2005.
JU will have its hub in BEG and INI as well as a focus city in KVO and potentially BNX or SJJ in the future. They will probably introduce charter flights from more cities in the future while Wizz air will keep on expanding left and right. I predict a LJU base after corona.
Only thing that I see changing is FR becoming more aggressive down the road. YM and OU won't be around in the next 5 to 10 years.