Air France-KLM has officially announced the completion of a definitive agreement with private equity firm Apollo Global Management for a substantial capital injection of 500 million euros ($561 million) into one of its vital engineering and maintenance units.
In the aviation industry, sale and leaseback deals are frequently employed as financing mechanisms. However, the emergence of new funding sources has sparked increased competition for conventional leasing companies.
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The newly acquired funding from Apollo will be allocated to support the French company's Engineering and Maintenance (MRO) components activity. It's crucial to note that this injection will not result in any change of ownership for the division, nor will it impact the existing employees' contracts, according to the company's statement.
As part of the agreement, Apollo will be subscribing to perpetual bonds that carry an initial interest rate of 6.9% for the first three years. Subsequently, there will be gradual step-ups and caps applied to the interest rate. Additionally, Air France will retain the option to redeem these bonds at any point after the initial three years.
This is not the first collaboration between Air France-KLM and Apollo Global Management. In a similar move last year, the private equity firm had invested 500 million euros in the company, aiding in the repayment of French state aid.