Air France-KLM and Apollo sign a definitive agreement for a EUR 500 million investment into an ad hoc operating affiliate of Air France owning spare engines

Rhea-AI Summary

Air France-KLM has signed an agreement with Apollo Global Management for a EUR 500 million investment in an operating affiliate that will manage spare engines for Air France's maintenance activities. The investment involves perpetual bonds, yielding an initial interest rate of 6% for three years, facilitating the redemption of state aid bonds. This transaction aims to lower financing costs without affecting ownership or operations. Expected to close in July 2022, it supports Air France's fleet renewal efforts while maintaining employee contracts.

Positive

• EUR 500 million investment to support spare engine operations.
• Lower financing costs through perpetual bonds with a 6% interest rate for three years.
• No change in ownership or operational aspects of Air France Engineering and Maintenance.

Negative

• None.

Paris, July 13^th 2022

Air France-KLM and Apollo sign a definitive agreement for a EUR 500 million investment into an ad hoc operating affiliate of Air France owning spare engines

Air France-KLM and Apollo Global Management (NYSE: APO) today announced the signing of a definitive agreement for Apollo-managed funds and entities to make a EUR 500 million investment into an ad hoc operating affiliate of Air France that will own a pool of spare engines dedicated to the airline’s Engineering and Maintenance activities.

Under this agreement, Apollo affiliated entities will subscribe to perpetual bonds issued by the ad hoc operating affiliate, which will be accounted as equity under IFRS. The proceeds of the transaction will enable Air France-KLM and Air France to further redeem the French State perpetual bonds, in accordance with the article 77 bis of the European Commission’s “Temporary Framework for State aid measures to support the economy in the current Covid-19 outbreak”, hence pursuing the redemption of the French State aid.

As a result of the transaction, Air France-KLM will benefit from lower financing costs. The perpetual bonds will bear an interest rate of 6% for the first 3 years, and gradual step ups and caps will be applied thereafter. Air France will have the ability to redeem the bonds at any time after year 3.

This structure will incur no change of ownership, operational and social aspects of Air France Engineering and Maintenance activity. In the future, it could also help finance the acquisition of additional spare engines to support Air France’s fleet renewal program. There will be no change in the way Air France uses the spare engines, and no impact on Air France or Air France-KLM employees’ contracts.

The transaction, expected to close later in July, is a part of the recapitalization measures announced on February 17^th, 2022.

Deutsche Bank AG and Skadden, Arps, Slate, Meagher & Flom LLP are acting as exclusive financial and legal advisors to Air France-KLM. Apollo Global Management was advised by Milbank LLP and Jeantet as legal advisors.

Investor Relations                                                        

Frédéric Kahane                 Michiel Klinkers                                

33 1 49 89 52 59                         +33 1 49 89 52 60                             

frkahane@airfranceklm.com                        michiel.klinkers@airfranceklm.com

Website: www.airfranceklm.com

Attachment

• 20220713 - AFKLM_Maia_Press Release_final Eng version

FAQ

What is the significance of the EUR 500 million investment by Apollo in Air France-KLM?

The investment will provide financial support for managing spare engines, aiding Air France-KLM in reducing financing costs and facilitating the redemption of state aid bonds.

When is the transaction between Air France-KLM and Apollo expected to close?

The transaction is expected to close later in July 2022.

What are the terms of the perpetual bonds issued to Apollo by Air France-KLM?

The bonds will have an initial interest rate of 6% for the first three years, with gradual step-ups and caps thereafter.

Will the investment from Apollo change the operations at Air France-KLM?

No, the transaction will not change ownership or operational aspects of Air France's Engineering and Maintenance activities.

How will the EUR 500 million investment affect Air France's financial structure?

The investment will enable Air France to manage lower financing costs and redeem French State perpetual bonds.