Air Serbia requests 82% cut in Etihad Partners loan
Air Serbia has requested an 82% reduction in the repayment of its multi million dollar debt to Etihad Airways Partners I BV and Etihad Airways Partners II BV, after launching talks with the special purpose vehicles set up by Etihad Airways in 2015. The carrier previously informed the funding vehicles that due to the financial strain caused by the coronavirus Covid-19 pandemic it may not be able to meet its obligations and payments. “Based on the recent market and economic projections for the future, the borrower [Air Serbia] has assessed what it believes will be its likely revenue in the short and medium term leading up to the repayment date. Based on such forecast, the borrower has indicated that the loan would need 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”, EA Partners said in a statement. The 82% reduction refers to each of the two loans individually. It should be noted that Air Serbia's part-owner Etihad Airways does not run the Etihad Airways Partners funding vehicles nor does it play part in its decision making process.
Five years ago, Etihad embarked on an international roadshow in Abu Dhabi, Dubai and London by creating the funding vehicles. The group successfully raised 700 million US dollars, which was split across the seven Etihad Partners entities, including Air Serbia. The funding vehicle comprises largely of local and international investment funds. 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 in March.
The Serbian carrier has indicated that it is prepared to provide the Etihad Partners investors with details on how it concluded it would need to reduce the debt by 82%, together with its projections and financial models. “As of date hereof, the issuer [EA Partners] does not have any further information in relation to the borrower’s proposal. The issuer will provide further updates to the holders of the notes upon receiving further information in due course”, EA Partners concluded. Air Serbia recently outlined it was undertaking a number of cost saving measures in order to alleviate the effects of the Covid-19 pandemic. The airline has rationalised its fleet, renegotiated leasing terms for its aircraft, secured slots for 2021, deferred the payment of air navigation taxes for next year, as well as reduced airport fees and capital investments, among other measures.
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