Air Baltic - comment

Good news. A group of Air Baltic bondholders seems to have agreed heads of terms with the airline for interim financing of a surprisingly precise €257m, according to flightglobal.com. This is prima facie good news for Air Baltic and the participating bondholders, but we are wary of that group and don't immediately assume that participation in the fresh cash will be free for all. We expect a roll-up feature. It is a little more money than we had on the radar (the €225m of New Financing indicated in the plan), but we also doubt that the group would have gone through the motions if it didn't already believe the €100m equity financing would come together. So we are changing stance here; the deal looks all but done. Bonds get new debt instruments worth €25c/€ nominally (down from €33c/€ due to the higher fresh cash going super sr.) and probably less in the market, plus an illiquid minority equity participation, most likely. Trading in the low 20c/€, and considering how material a small €32m swing in fresh cash requirement is to recoveries) the bonds still struggle to get us excited. €10c/€, with a view to doubling the money, sounds like a wiser target.