Air France-KLM and U.S. asset management business Apollo Global Management have signed an agreement for Apollo-managed funds and entities to invest €500 million ($502 million) in an ad hoc Air France operating affiliate.
The affiliate will own a pool of spare engines dedicated to Air France’s Engineering and Maintenance (E&M) activities.
Under the agreement, New York-headquartered Apollo’s affiliated entities will subscribe to perpetual bonds issued by the affiliate, which will be accounted as equity. The proceeds of the transaction will enable Air France-KLM and Air France to further redeem French government perpetual bonds, continuing the redemption of French State aid provided during the pandemic.
The transaction will mean Air France-KLM will benefit from lower financing costs, the parties said in a July 13 statement. The perpetual bonds will bear an interest rate of 6% for the first three years, with gradual step-ups and caps applied thereafter. Air France will have the ability to redeem the bonds at any time after year three.
This structure will incur no change of ownership, operational and social aspects of Air France’s E&M activity. In the future, it could also help finance the acquisition of additional spare engines to support Air France’s fleet renewal program, the parties said.
The transaction is expected to close later in July.
Related Content
