The national company airBaltic borrowed a third of a billion euros at high interest rates

The Latvian airline airBaltic has issued bonds secured by aircraft for a period of 5 years and 3 months in the amount of 340 million euros. The interest rate was an impressive 14.5%.

Of this amount, 290 million euros were provided by unnamed private investors. And the Latvian state paid 50 million euros.

A rate of 14.5% – is it a lot or a little? For comparison: at the beginning of the year, Estonia issued 10-year bonds at 3.35% per annum. Of course, they lend money to the state at lower interest rates than to the state-owned (98 percent) airline. However, 14.5% looks like a lot even for troubled airBaltic.

Yes, what can I say – even mortgage loans are given to residents of Latvia at twice the rates that the national airline was able to provide.

The offer to buy the bonds was made to more than 100 global investors from more than 20 countries. Demand for securities exceeded supply, and the final amount of orders was around 840 million euros.

This bond issue followed eight days of presentation trips during which airBaltic management met with potential investors.

airBaltic CEO Martin Gauss considers the bond sale a successful transaction. In his opinion, “airBaltic has strengthened its position in the Baltic region.”

However, the airline will not see “live” 340 million euros. Most of the millions borrowed will go towards paying off previous debts. In particular, to repay 200 million euros, which must be paid back in the near future.

The notes are expected to settle on 14 May 2024 and will be listed on Euronext Dublin.

Be that as it may, Latvian Prime Minister Evika Silina seems pleased with the deal: