Saturday, June 22, 2024

Aeroméxico puts up most of its assets for US $1 billion in financing

Fighting for survival amid the coronavirus crisis that has crippled the global airline industry, Mexico’s flag carrier Aeroméxico has put up virtually all its assets as collateral for a US $1-billion loan.

A judge of the United States Bankruptcy Court for the Southern District of New York has granted preliminary approval of a financing agreement between Aeroméxico, which filed for bankruptcy protection in the U.S. at the end of June, and Apollo Global Management, an investment management firm. 

Apollo has released $100 million to the airline as a result of the preliminary authorization with the bulk of the remaining $900 million to follow final approval that is expected to be granted on September 22.

To secure access to the funds, Aeroméxico agreed to forfeit a long list of its assets in the event that it is unable to meet loan repayments.

They include two Boeing 737-700s; two Boeing 737-800s; its interest in a Mexico City skyscraper; the commercial value of the 51 routes it operates; and its slots – scheduled arrival and departure times – at international airports in Mexico City, New York and London.

Also put up as collateral by Aeroméxico are all its brands registered with the Mexican Institute of Industrial Property; its information about clients; cash it holds in bank accounts; its interest in a company that manages its loyalty program; its interest in an aircraft maintenance facility in Querétaro; and its options to purchase eight planes it currently rents.

As a precondition to releasing further funds, Apollo has demanded that Aeroméxico cut its operating costs.

Aeroméxico has already negotiated provisional agreements with employees to reduce salaries amid the coronavirus crisis but  Apollo wants that cost-cutting measure, and others, to continue for at least four years.

A condition of the transfer of a second $800-million tranche of the $1-billion loan is that Apollo will have the option to become a non-majority shareholder in the airline.

To cuts its costs and thus comply with Apollo’s demands, Aeroméxico is planning to reduce the number of pilots and cabin crew it employs by one-third and cut employee salaries until 2025, according to a presentation to investors. The airline also plans to reduce its fleet size by 46 planes – just over a third of its total – by the end of the year.

The measures are expected to generate savings in the hundreds of millions of dollars annually.

To access additional loan funds from Apollo – the second tranche of the loan is to be transferred by March 2021 – Aeroméxico must reach a deal to cut salaries with employees’ unions by December 31.

Source: Reforma (sp), El Financiero (sp) 

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