Narrative
Full Description
Project narrative
In July 2011, a syndicate of an unspecified number of banks — including the Amsterdam Branch of ICBC (Europe) S.A. joining as a tier 2 bank in syndication — entered into a €540 million EUR ($762 million USD) syndicated revolving credit facility (RCF) agreement with Koninklijke Luchtvaart Maatschappij N.V. (KLM Royal Dutch Airlines) — the Netherlands-incorporated flag carrier airline of the Netherland, headquartered in Amstelveen, with its hub at nearby Amsterdam Airport Schiphol majority-owned by Air France-KLM S.A. (99% stake), a France-incorporated Franco-Dutch airline holding company with its headquarters in the rue du Cirque, Paris that, at the time, had the Government of France as its single largest shareholder (15.8% stake) — for unspecified purposes. The RCF carried a maturity period of five years and a final maturity date in July 2016. The RCF included financial covenants concerning the ratio of earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) to net interest charges added to one third of operating lease payments (the ratio would have to be greater than 2.5) and non-current assets in the balance sheet that were not pledged as collateral would have to at least equal unsecured net debts, with the ratios calculated every six months. Record ID#110745 captures ICBC (Europe)'s contribution. Then, on July 2, 2015, a syndicate of 10 banks — including the Bank of China (BOC) and the Industrial and Commercial Bank of China (ICBC) — entered into a €575 million EUR ($637 million USD) syndicated RCF agreement with Koninklijke Luchtvaart Maatschappij N.V. — still 99%-owned by Air France-KLM S.A., with the Government of France as its single largest shareholder (17.6% stake) — for refinancing purposes. The RCF carried a maturity period of five years. The RCF included covenants based on KLM's consolidated financial statements. The proceeds were to refinance the €540 million EUR RCF from July 2011. Record ID#110737 captures BOC's contribution. Record ID#110746 captures ICBC's contribution. As of December 31, 2015, the RCF was undrawn. Then, on May 17, 2018, a syndicate of 12 banks — including BOC and ICBC — entered into a €665 million EUR ($778.31 million USD) syndicated RCF agreement with Koninklijke Luchtvaart Maatschappij N.V. — now wholly-owned by Air France-KLM S.A., with the Government of France as its single largest shareholder (14.3% stake) — for refinancing purposes. This RCF carried a maturity period of five years with two one-year extension options. The RCF included covenants based on KLM's consolidated financial statements. The proceeds were to refinance the €575 million EUR RCF from July 2015 that due to mature in July 2020. Record ID#110747 captures BOC's contribution. Record ID#110748 captures ICBC's contribution. In 2019, the lending syndicate — including the Chinese state-owned banks — entered into an amendment agreement with the borrower; in the amendment, the lenders extended the maturity by the RCF by one year — a new maturity period of six years — to mature on May 17, 2024, in line with the first amendment option. Record ID#110749 captures BOC's contribution to the debt rescheduling. Record ID#110750 captures ICBC's contribution to the debt rescheduling. As of December 31, 2019, the RCF was undrawn. Then, on March 19, 2020, due to the outbreak of the COVID-19 pandemic and accompanying widespread economic impact on the airline industry negatively impacting KLM, KLM fully drew down the €665 million EUR RCF for an initial period of 6 months. Then, on June 25, 2020, Air France-KLM's board of directors approved a €3.4 billion EUR financing package from KLM to support for liquidity support and general corporate purposes during the COVID-19 pandemic, consisting of two facilities for KLM (which, while still wholly owned by Air France-KLM, now had the Government of France (14.3% stake) and the Government of the Netherlands (14.0% stake) as indirect shareholders via Air France-KLM: a €2.4 billion EUR ($2.71745 billion USD) RCF from a syndicate of 11 banks — including BOC and ICBC — with 90% of the RCF receiving a guarantee from the Government of the Netherlands and a €1 billion EUR direct loan from the Government of the Netherlands. Both the revolving credit facility and the direct loan were required to drawn simultaneously on a pro rata basis. As part of the state aid package, Government of Netherlands imposed a number on conditions on KLM via a framework agreement, with commitments by KLM to becoming more sustainable, improve its performance and competitiveness and a comprehensive restructuring plan and a contribution made by employees, suspend dividend payments to its shareholders until these two facilities were repaid. The RCF carried a maturity period of five years and an interest rate of EURIBOR (with a floor at zero) plus a margin of 1.35%, with a 0.50% fee for the Dutch Government guarantee for the first year, 1.00% for the second and third, and 2.00% after the third year (and reportedly a 10% interest rate on the non-government guaranteed portion). The direct loan carried a maturity period of 5.5 years and an interest rate of 12-month EURIBOR (with a floor at zero) plus a margin of 6.25% for the first year, 6.75% for the second and third, and 7.75% for the fourth and fifth. The direct loan was subordinated to the RCF. Beginning from September 2021, financial covenants for a required interest coverage ratio and a required ratio of consolidated unsecured assets to consolidated unsecured net debt were required. BOC contributed €260 million EUR, as captured by Record ID#102045. Record ID#102046 captures ICBC's contribution. On July 13, 2020, the Dutch Parliament and the European Commission approved the Dutch state aid plan. Then, on August 26, 2020, KLM drew down on €665 million EUR of its 2020 €2.4 billion EUR RCF, which was used to used to refinance the drawn portion of the 2018 €665 million EUR RCF, which was then terminated. KLM also drew down €277 million EUR under the direct loan from the Government of the Netherlands. As of December 31, 2020, €665 million EUR was outstanding under the 2020 RCF. On October 1, 2020, KLM submitted its restructuring plan to the Dutch Ministry of Finance, as promised its in agreement for the state aid. On November 3, 2020, the Netherlands' Ministry of Finance approved the restructuring plan, giving KLM the ability to draw further amounts under the state aid package. In July 2021, the European Commission reauthorized the state aid. As of December 31, 2021, €665 million EUR was outstanding under the RCF. In the first half of 2022, KLM fully repaid the RCF and direct loan and it had no outstanding balance under the RCF. In January 2023, the Dutch stage agent monitoring compliance with the conditions under the support package reported that, while KLM had taken steps to follow it, there were conditions that had not been met, namely due to rising costs of operations (which KLM blamed on needing to increase wages to match high inflation and a competitive labor market). On April 18, 2023, a syndicate of 14 banks entered into a €1.0 billion EUR syndicated RCF with KLM. The RCF carried a maturity period of five years with two one-year extension options and with environmental, social, and governance (ESG)-linked Key Performance Indicators. The proceeds of this RCF were used to replace (refinance) the €2.4 billion EUR RCF from 2020 and the €1 billion EUR direct loan, both of which were cancelled and thus the associated conditions no longer applicable.