Icelandair Group successfully completed a comprehensive restructuring of its finances in September 2020. The overarching principle of the restructuring process was to align operating costs and payment schedules with the Company’s anticipated cash generation for up to the next 24 months. The new structure is a result of wide-ranging participation by key stakeholders as well as the Icelandic government.
It was great to be part of the highly professional team of both internal and external experts that led the financial restructuring of the Company. The process was both complicated and challenging and included a wide-range participation of key stakeholders as well as the Icelandic government. The key to the success of this extensive project was the dedication and resilience of the team. The final step was a successful share offering were USD 169 million was raised in new share capital and we welcomed 7,000 new shareholders to our shareholder group.
Íris Hulda Þórisdóttir
Director - Business Control
The Company reached new long-term collective bargaining agreements with its flight operations unions, i.e. the aircraft mechanics, pilots and cabin crew. The new contracts, will strengthen the Company’s competitiveness by bringing unit costs more in line with peers going forward, while simultaneously securing attractive employee compensation.
The Company executed written agreements with 15 main counterparties regarding concessions and payment deferrals. These include lenders, lessors, credit card acquirers and fuel hedging counterparties. The restructuring objective was to strengthen the Company’s liquidity position by adjusting the cash flow and repayment profiles to minimal operations. The deferral agreements include renegotiated financial covenants that will revert to pre-COVID.
An agreement was reached on the reduction of Icelandair’s B-737 MAX purchase commitment by four aircraft and a revised delivery schedule for the remaining six MAX aircraft. Furthermore, the settlement provides additional compensation for Icelandair, which covers a substantial portion of the damages incurred from the suspension. The compensation will mostly be realized by Q2 2021. The agreement strengthens Icelandair Group’s liquidity position and allows for more flexible fleet planning in the upcoming years.
An agreement with the Icelandic Government secures a government guarantee to two local banks, Íslandsbanki and Landsbankinn, for 90% of a USD 120 million credit facility that these banks will jointly provide the Company. The drawdown period of the credit facility is two years followed by a three-year repayment profile. The facility may only be used towards the Company‘s flight operations to and from Iceland and was contingent on the Company successfully raising at least ISK 20,000 million in the share offering that took place in September.
The final step in the restructuring was a successful share offering that ended 17 September 2020. In the offering ISK 20 billion new shares were offered for sale. The offering was oversubscribed by 85% with strong demand from both institutional and retail investors. The offering price was fixed at ISK 1.0 per share in both order books. Subscriptions totaled over nine thousand and amounted to ISK 37.3 billion. The Board of Directors accepted subscriptions for 30.3 billion and increased the offering size to a total of ISK 23 billion shares as per the authorization from the Company‘s shareholders‘ meeting.
Following the offering the total number of outstanding shares in Icelandair Group is ISK 28.4 billion. In association with the offering the Company issued warrants, equaling 25% of the nominal amount of new shares, ISK 5.75 billion in total. The warrants were delivered to all investors that got allotted new shares in the offering free of charge. The warrants grant their holders a right, without obligation, to acquire additional shares in the Company at specific intervals over the next two years. The warrants are freestanding and separate financial instruments and can be traded independent of the shares until their respective exercise periods. The warrants were listed on the Nasdaq Iceland main market on 13 October 2020.