- AirBaltic filed for Chapter 11 bankruptcy to restructure its substantial debt amid industry crisis
- Lenders pledged €350 million financing to support AirBaltic during restructuring proceedings
- Latvian government owns majority of AirBaltic; Lufthansa holds a 10% minority stake
AirBaltic, the flag carrier of Latvia, voluntarily filed for Chapter 11 bankruptcy protection in New York on Monday as the airline is attempting to restructure its substantial debt load amid a severe industry-wide crisis due to the US-Israel war against Iran, according to reports.
Lenders such as Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management have committed to providing AirBaltic with €350 million ($405 million) in financing to support its operations during the restructuring, the company said in a statement.
Jet fuel prices have doubled as a result of the west Asia war, creating the largest catastrophe for the air transport industry since the Covid-19 pandemic. Executives and investors have cautioned that carriers with strained balance sheets run the danger of failing.
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AirBaltic has been in talks with creditors to secure short-term funding as its financial situation worsened, but it was having trouble reaching an agreement. Bond yields skyrocketed due to growing market anxiety over the possibility of a default, Reuters reported.
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In a bankruptcy court petition, the airline's board stated: "AirBaltic has been experiencing acute financial stress due to a combination of financial and geopolitical factors."
After failing to reach a financial agreement with creditors, Latvia's state-backed airline, AirBaltic, voluntarily filed for bankruptcy. The yields on its bonds have increased dramatically in recent weeks.
The Latvian government owns the majority of AirBaltic, which has a fleet of about fifty Airbus A220-300 aircraft, with Lufthansa owning a 10% minority stake.
Following Spirit Airlines' demise in May, AirBaltic is the second airline tragedy associated with the conflict.
According to AirBaltic, the decision was made in order to obtain protection from creditors while negotiating a debt restructure. During the court-monitored procedure, flights would run on time. Additionally, it stated that it hopes to complete the Chapter 11 process by June of the following year.
Prior to the filing, bondholders of AirBaltic were scheduled to vote on the company's proposal to raise €257 million through new super-senior debt that would be due in February 2027 at a 25% interest rate.
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