Icelandair seeks to extend waiver for covenant breach through June

By Susanna Moon

Chicago, Nov. 30 – Icelandair Group hf said it is planning to address the covenant breach under its $190 million senior bonds due 2021 by way of written procedure on Monday.

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

Bondholders had temporarily waived the gross leverage covenants until Nov. 30.

The issuer will be asking holders to waive the maintenance tests and gross leverage through June 30, 2019, according to a company update on Friday.

The proposal will also include the following:

• The issuer will repurchase one third of the outstanding bonds by Jan. 15 at a price of 100.5%;

• The issuer may call the bonds from Feb. 1 through Dec. 31, 2019 at a price of 100.5% if the option is exercised from Feb. 1 through March 31 or at 101% if exercised from April 1 through Dec. 31, 2019;

• Bondholders may put the bonds at 102% between June 30, 2019 through July 15, 2019;

• The maintenance tests clause will be amended to read the lower of $100 million or the outstanding amount under the bonds; and

• The issuer will forgo any dividend payments during the waiver period.

DNB Markets is the financial adviser.

The temporary waiver for the gross leverage covenants was conditional on reaching a long-term agreement with the bondholders by Nov. 30, the company said.

Nordic Trustee & Agency AB is the agent.

As announced Nov. 16, the company’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 previous notice by Nordic Trustee & Agency AB.

The company said on Nov. 29 that its planned acquisition of Wow air had been canceled.

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

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