Air Europa is looking for a white knight among international funds that will allow the airline to continue on its own before its next debt maturities. According to market sources to elEconomista.es, the Hidalgo family company is negotiating with US funds – with a long history of investing in Spain – the granting of a loan that could reach 400 million. According to the same sources, specialized debt funds could be interested in granting Air Europa part of the credit in the form of long-term financing convertible into airline shares. For their part, Air Europa sources deny the existence of the operation.
This movement, -if it were finally closed on the proposed terms-, would mean an unexpected change of direction in the airline’s medium-term plans. It should be remembered that IAG, through Iberia, after obtaining the relevant authorizations, the Spanish flag carrier carried out the conversion, taking this shareholding percentage in a first step to reach 100% of the capital of the firm based in the Balearic Islands.
Air Europa’s liabilities climbed to 992 million after the ICO and Sepi loans
The entry on the scene of US funds could, therefore, blur Iberia’s plans, since the current distribution of Air Europa (20% of the capital in the hands of Iberia and 80% in the hands of Globalia) would give way to the possibility of including to the Ares or Cerberus funds in the shareholding with a significant percentage of the company, which would take Iberia’s negotiations to a new point.
The truth is that you need new financing to face the most immediate payments for the maturity of your debt. According to the closing accounts for 2021, -the latest available-, and in the absence of incorporating the 100 million euros that Iberia infused into it a few months ago, the debt of the Spanish airline has escalated to 992 million euros due, among other factors, to the two loans granted by the Sepi (State Company of Industrial Participations) of 475 million euros and the 141 million of its banking pool guaranteed by the ICO (Official Credit Institute) and that it received during the hardest moments of the Covid.
This figure becomes even more relevant if the company’s upcoming debt maturities are put on the table. As can be seen in the table above, the Hidalgo and Iberia family airline had loans for a value of 348 million euros at the end of 2021 maturing during the same year. In addition, during 2023 it should also face the end of the payment period of 16.9 million euros of the loan guaranteed by the ICO and up to 51 million of other financial liabilities.
recover traffic
The Palma de Mallorca-based airline began to take off with the end of the restrictions derived from the pandemic. In this way, the opening of destinations in the Caribbean and the United States were key. At the end of 2021, and taking into account that these markets were opened just two months after the end of the year, the company’s revenues had grown significantly to reach 898 million euros. Similarly, the box went from just 12.5 million in 2020 to 97.3 million at the end of 2021. The situation, according to knowledgeable sources, has improved in recent months and has been reinforced with the change in management of the company since Jesús Nuño de la Rosa became CEO in July.
Despite this, the reduction in the fleet continues to affect the company and it is still 34% below the level of flights on the same dates in 2019. To try to alleviate this situation, the airline’s new management team has managed to In just three months, carry out the negotiation of the credit of 400 million, an agreement with Boeing for the change of an old contract for the purchase of aircraft and its rental to the lessors.
investor appetite
According to the sources consulted, the transaction is yet another example of how uncertainty and the economic situation are once again putting Spain in the spotlight for large private equity funds, which “explore investment opportunities in our country and try to take advantage of the crisis to acquire assets with value creation path and “at a good price” Cerberus, which manages 55,000 million dollars in assets through its different credit, private equity and real estate platforms, already participated in the bid for the airline Italian state-owned Alitalia, reborn from the ashes as the new ITA Airways after being rescued on several occasions and after different failed merger attempts.
Cerberus is one of the most active international funds in Spain, with a wide portfolio of hotel and real estate assets – Haya Real Estate, the real estate servicing platform purchased from Bankia in 2013 for 90 million, also appears in its national portfolio. With the transfer of the Spanish solar energy operator – valued at around 800 million – the fund sealed one of its best investments in Spain.
For its part, Ares Management Corporation has 335,000 million dollars of assets under management and has taken positions in Spanish companies such as Naviera Armas and the dental firm with its business lines: credit, private equity and real estate. Founded in 1997 and with headquarters in Los Angeles (California, USA), the led firm was born as a credit fund until, in 2003, it also launched its inaugural private equity vehicle endowed with 750 million dollars.
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