Air France-KLM has successfully issued undated deeply subordinated notes

Rhea-AI Summary

Air France-KLM has issued undated deeply subordinated notes totaling €3 billion as part of its recapitalization strategy, aimed at strengthening its equity without impacting cash flow. This issuance consists of three tranches of €1 billion each, with respective interest rates starting at 7.00%, 7.25%, and 7.50%. The notes, subscribed entirely by the French State, can be converted into equity under certain conditions, providing increased flexibility in debt repayment. This move enhances Air France's financial stability amid ongoing recovery efforts.

Positive

• Total issuance of €3 billion strengthens equity without cash flow impact.
• Interest rates provide attractive yields starting at 7.00%, 7.25%, and 7.50%.
• Tranches offer flexibility in repayment options and can be converted into equity.

Negative

• Future interest rate adjustments could escalate to 11.00% if specific conditions are not met.

Roissy, 21 April 2021

Air France-KLM has successfully issued undated deeply subordinated notes in three tranches of €1 billion, for a total amount of €3 billion

As part of its recapitalization plan announced at the launch of the capital increase announced on April 12, 2021, and completed on April 19, 2021 for an amount of €1.036 billion, the Company has issued on April 20, 2021 undated deeply subordinated notes (recorded as IFRS equity in the Company's consolidated financial statements) for a total amount of €3 billion, subscribed in full by the French State by way of set-off on claims it holds on the Company pursuant to the shareholders’ loan (the “ACC”) granted in May 2020 and fully drawn for the amount of €3 billion (the “Deeply Subordinated Notes”).

This issue will be composed of three tranches with a perpetual maturity and a nominal amount of €1 billion each, with respective first redemption options (Call) at 4, 5 and 6 years and then redeemable on each interest payment date, and bearing interest at 7.00%, 7.25% and 7.50% respectively until these dates.

These initial interest rates for each tranche will increase to 8.50%, 8.00% and 8.00%, respectively, on the first respective early redemption date at the option of the Company, of the relevant tranche. These interest rates will then be reset every year from April 20, 2028, on the basis of the 12-month Euribor rate plus a margin of 10.40%, it being specified that the applicable 12-month Euribor rate will not be lower than -0.45%. The Company will have the option to defer the payment of interest at its discretion, in whole or in part. Deferred interest on the Deeply Subordinated Notes will be accrued and capitalized.

Payment of interest will nevertheless be mandatory notably in the event of payment of dividends or repurchase of equity securities, subject to certain customary exceptions.

These Deeply Subordinated Notes may be converted by way of set-off (compensation de créances) in the context of future issuances of quasi-capital securities or capital increases. In the event of (i) a third party, acting alone or in concert, holding more than 30% of the share capital or the voting rights of Company, (ii) non-approval by the shareholders’ general meeting of a project of issuance of shares or any other securities giving right to shares of the Company, submitted by the board of directors, enabling the French State to convert in ordinary shares of the Company or any other securities giving right to shares of the Company all or part of the Deeply Subordinated Notes or (iii) implementation of an issuance of shares or other securities giving right to shares of the Company (with the exception of transactions implemented with preferential subscription rights or with priority subscription period and which may be subscribed by way of set-off (compensation de créances), transactions reserved for the French State or transactions without preferential subscription rights by way of "private placement" previously authorized by the French State), without the prior consent of the French State, the Company may redeem (a) in the event referred in (i) and (ii) above, in whole, and (b) in the event referred to in (iii) above, in whole or in part, the Deeply Subordinated Notes outstanding. Failing which the applicable interest rate shall be increased by an additional margin of 5.50% per annum from the date of occurrence of any of the events referred to in (i), (ii) or (iii). Such interest rate adjustments shall be cumulative, without exceeding 11.00% per annum.

This transaction will strengthen Air France's equity by €3 billion in accordance with IFRS accounting standards, without impact on cash flow, while increasing the flexibility in its profile of debt repayment.

Investor Relations                                                                Press

Olivier Gall                 Michiel Klinkers                        Press office        

+33 1 49 89 52 59                         +33 1 49 89 52 60                                 +33 1 41 56 56 00

olgall@airfranceklm.com                        michiel.klinkers@klm.com      

Website: www.airfranceklm.com

IMPORTANT INFORMATION

This press release includes "forward-looking statements". All statements other than statements of historical facts included in this press release, including, without limitation, those regarding Air France-KLM’s financial position, business strategy, plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Air France-KLM, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Air France-KLM’s present and future business strategies and the environment in which Air France-KLM will operate in the future. Additional factors could cause actual results, performance or achievements to differ materially. Air France-KLM expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained in this press release, whether as a result of new information, future developments or otherwise.

This press release does not constitute an offer to sell nor a solicitation of an offer to buy, nor shall there be any sale of ordinary shares in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The distribution of this document may, in certain jurisdictions, be restricted by local legislations. Persons into whose possession this document comes are required to inform themselves about and to observe any such potential local restrictions.

This press release is an advertisement and not a prospectus within the meaning of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 (as amended, the “Prospectus Regulation”). Potential investors are advised to read the prospectus before making an investment decision in order to fully understand the potential risks and rewards associated with the decision to invest in the securities. The approval of the prospectus by the AMF should not be understood as an endorsement of the securities offered or admitted to trading on a regulated market.

With respect to the member states of the European Economic Area (other than France) (each a “Relevant Member State”), no action has been undertaken or will be undertaken to make an offer to the public of the securities referred to herein requiring a publication of a prospectus in any Relevant Member State. As a result, the securities may not and will not be offered in any Relevant Member State except in accordance with the exemptions set forth in Article 1 (4) of the Prospectus Regulation or under any other circumstances which do not require the publication by Air France-KLM of a prospectus pursuant to Article 3 of the Prospectus Regulation and/or to applicable regulations of that Relevant Member State.

The distribution of this press release has not been made, and has not been approved, by an “authorised person” within the meaning of Article 21(1) of the Financial Services and Markets Act 2000. As a consequence, this press release is only being distributed to, and is only directed at, persons in the United Kingdom that (i) are “investment professionals” falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Article 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “Relevant Persons”). Any investment or investment activity to which this document relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

This press release may not be published, distributed or transmitted in the United States (including its territories and dependencies).

This press release does not constitute or form part of any offer of securities for sale or any solicitation to purchase or to subscribe for securities or any solicitation of sale of securities in the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or the law of any State or other jurisdiction of the United States, and may not be offered or sold in the United States absent registration under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Air France-KLM does not intend to register all or any portion of the securities in the United States under the Securities Act or to conduct a public offering of the securities in the United States.

This announcement may not be published, forwarded or distributed, directly or indirectly, in the United States of America, Australia or Japan.

Attachment

• Press release Air France-KLM has successfully issued undated deeply subordinated notes ENG

FAQ

What is the total amount of subordinated notes issued by Air France-KLM?

Air France-KLM issued a total of €3 billion in subordinated notes.

Who subscribed to the €3 billion subordinated notes issued by Air France-KLM?

The €3 billion in subordinated notes was fully subscribed by the French State.

What are the interest rates for the new subordinated notes issued by Air France-KLM?

The interest rates for the three tranches are 7.00%, 7.25%, and 7.50%.

What happens to the interest rates for the subordinated notes after the call option period?

The interest rates will be reset based on the 12-month Euribor rate plus a margin of 10.40% after the call option.

How does the issuance of subordinated notes impact Air France-KLM's financials?

The issuance enhances Air France-KLM's equity by €3 billion without affecting cash flow.