Icelandair sets holder meeting to waive covenant breach for 4¼% bonds

By Susanna Moon

Chicago, Nov. 7 – Icelandair Group hf has scheduled a holder meeting on Nov. 15 to ask for a temporary waiver under its $23.66 million of outstanding 4¼% bonds due Jan. 1, 2020.

The issuer is asking holders to amend the bond terms to grant a temporary waiver until Nov. 30 for financial covenants.

The terms would be amended as follows: “In case of a breach of these covenants or other terms of the bond may be accelerated by bondholders. However, right to acceleration due to a breach of financial covenants on Sept. 30 regarding gross leverage and gross leverage 2 will become applicable on Nov. 30 if these covenants have not been fulfilled by that time,” according to a company announcement.

The voting rights will be for bondholders listed as of Nov. 7.

To amend the issue, the company needs the approval of 85% of the bondholders.

The company said on Oct. 31 that it was asking holders to waive breaches under its $190 million senior bonds due 2021 until Nov. 30 by way of written procedure.

The deadline for voting is 11 a.m. ET on Nov. 27. The record date is Nov. 5.

The quorum required is 20% and the procedure requires a majority of 50% of the adjusted nominal amount.

The company said on Oct. 30 that it was in breach of the gross leverage covenants under the terms of its $190 million senior bonds due 2021 and its $23.66 million bonds due 2020.

The company said it had a “constructive” dialogue with bondholders regarding a long-term solution and requested that the bondholders vote in favor of a temporary waiver of the covenant breach through November. The waiver would provide more time for the discussions.

The company said it had also begun talks with holders of the bonds due 2020 and expected to reach an identical long-term solution regarding those bonds. A temporary waiver of the covenants through November has support from over 85% of the bondholders, and the company will also continue discussions regarding a long-term solution, the previous release said.

Icelandair said that despite the covenant breaches its financial position remains strong. At the end of September, the company’s cash and short-term investments amounted to $184 million; the company’s equity was $575 million; and the equity ratio was 36%. Operating assets amounted to $674 million, and prepayments on the balance sheet due to new aircraft amounted to $176 million.

At the same time, the total interest-bearing liabilities amounted to $406 million, of which secured debt amounted to $194 million.

DNB Markets is the company’s financial adviser.

Icelandair is a Reykjavik, Iceland-based holding company active in the airline and tourism industries.

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