MIAMI – A consortium of senior secured creditors has committed to providing temporary funding of €300m to finance Swissport operations by completing the restructuring process. The ‘in principle’ agreement on a comprehensive restructuring involves extensive deleveraging and a new long-term debt facility of €500m that will replace the interim facility.
The additional liquidity from the ad hoc group of senior secured creditors (the “AHG”) gives Swissport ample headroom to trade through COVID-19 pandemic, execute on its operational plans, and take advantage of growth opportunities arising post-crisis.
The transaction is expected to complete in late 2020 and adds to the more than €200m liquidity Swissport still had as of August 18.
The agreement for a comprehensive restructuring and refinancing of Swissport involves senior secured creditors, led by the AHG, lenders under Swissport’s PIK facility agreement (the “PIK Lenders”) and HNA Group Co., Ltd. (“HNA”), Swissport’s current shareholder.
The extensive restructuring would substantially deleverage the balance sheet and include €500m in new long-term debt funding, potentially replacing the current €300m facility. Once the paperwork has been completed, specific details of the comprehensive restructuring will be published in due course.
According to the company, the restructuring will place it as a strong global partner for airlines and airports both in the passenger services market and in air cargo handling. Despite increased liquidity and lower debt rates ahead, Swissport says it will be able to take advantage of post-COVID-19 growth opportunities.
Comments from Swissport
“This agreement marks a transformational milestone for Swissport. The €300m of additional interim financing and the planned restructuring supported by our senior secured creditors and other stakeholders gives us the certainty that Swissport will trade successfully through the current market disruptions and emerge as an even stronger industry leader,” says Eric Born, Group President & CEO of Swissport International AG.
“It signals to our customers, our employees and all our other stakeholders that Swissport continues to be the partner they can rely upon. The agreement also represents an endorsement from some of the world’s leading investors in the fundamental strength of our business.”
“On completion of the transaction, Swissport will have significantly less leverage. The company will have a much stronger financial position and the resources to invest into the business, execute on our operational plans and exploit growth opportunities. Swissport will be very well positioned to succeed in the long-term,” adds Peter Waller, CFO of Swissport International AG.
Who are the AHG Lenders?
The AHG represents lenders from the US and the UK who own more than 75% of Swissport Financing’s €400m aggregate principal amount of 5.25% Senior Secured Notes due in 2024 (the “SSN”) and Swissport’s credit agreement of August 14, 2019 (the “CA”). Under Swissport’s PIK facility agreement of August 14, 2019, the PIK lenders represent 99% of the creditors.
It is understood that the agreement in principle and the successful completion of the transactions will be subject to the execution of definitive documentation, customary conditions and regulatory and other approvals.
Swissport Q2 2020 Financial Results
Overall, Swissport managed to handle the COVID-19 pandemic market disruption well, with stronger trading results and greater liquidity than originally anticipated.
Revenue amounted to €235.5m for the three months to 30 June 2020, down 70% from the previous year. The volumes of ground handling were down 88% and the volumes of freight were down 24% for said period.
Since the end of June, Swissport has seen a rise in shipments with shipments up to -67% and -19% respectively in the first half of August relative to the previous year’s ground handling and freight rates.
The company also says it has decreased costs by more than 55% in recent months, with nearly 55,000 of the 65,000 pre-crisis workers at some stage currently on furlough, unpaid leave, or redundant. This resulted in more than 85% cost savings compared to recent revenue.
In addition, operating EBITDA (pre-IFRS16) was negative €67m for Q2 2020 compared to €76m from Q2 2019 as a result of the significant volume drop from COVID-19. In July however, Swissport managed to record again positive EBITDA from better revenue, even higher cost reductions, and the impact of CARES.
Finally, Swissport had liquidity of €347m as of June 30, 2020, an amount still higher than its pre-crisis position. We can expect the company’s financial statements published in the coming days.
Featured image: Swissport Building. Photo: Swissport