Etihad Partners reject Air Serbia loan reduction proposal
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.
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