Icelandair trustee declares default on covenant breach for 4¼% bonds

By Susanna Moon

Chicago, Nov. 16 – Icelandair Group hf’s trustee said that an event of default “has occurred and is continuing” under the $23.66 million of outstanding 4¼% bonds due Jan. 1, 2020.

The issuer has failed to fulfill its obligations under the bond terms for the maintenance tests for the third quarter of 2018, but the agent has decided to wait to take action while awaiting the outcome of the written procedure or other instructions from the bondholders, according to a notice by Nordic Trustee & Agency AB.

The company said on Nov. 15 that it had obtained a temporary waiver under the notes at the meeting on Thursday, in which 96.15% of the bonds was represented and the proposal was accepted unanimously.

As announced Nov. 7, the issuer asked holders to amend the bond terms to grant a temporary waiver until Nov. 30 for financial covenants.

The terms will 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 previous announcement.

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 bondholders 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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