Air France-KLM launches a capital increase

Roissy, 12 April 2021

Air France-KLM launches a capital increase without shareholders’ preferential subscription rights, by way of a public offering and with a 3-day priority subscription period on an irreducible basis and on a reducible basis granted to existing shareholders, for an amount of approximately €988 million, which may be increased to a maximum amount of €1,136 in the event of the exercise in full of the increase option¹

Launch of the Private Placement

Subscription price per new share between €4.84 and €5.31

Air France-KLM (the “Company”) announces today the launch of a capital increase without shareholders’ preferential subscription rights by way of a public offering and with a priority subscription period on an irreducible and reducible basis granted to existing shareholders (the “Capital Increase”) for an amount of approximately €988 million, which may be increased to €1,136 million in the event of the exercise in full of the increase option (the “Increase Option”).

The net proceeds of the Capital Increase are expected to amount to €980 million (which may be increased to €1,126 million in the event of the exercise in full of the Increase Option. The net proceeds of the Capital Increase will be allocated to strengthen the equity of Air France. Air France will use the allocated amount to consolidate its liquidity and finance general corporate purposes in the context of the Covid-19 crisis.

The Capital Increase will lead to the issuance of 186 million new shares, which may be increased to 214 new shares in the event of the exercise in full of the Increase Option (“New Shares”), corresponding to a maximim of 50% of the Company’s share capital.

This press release relates to the launch of the Private Placement (as defined below).

In the context of the recapitalization plan, the Company will also proceed with the issue of undated deeply subordinated notes (recorded as equity in the Company's consolidated financial statements) for a total amount of €3 billion, subscribed in full by the French State by way of set-off on claims it holds on the Company pursuant to the shareholders’ loan granted in May 2020, fully drawn for the amount of €3 billion (the “Super-Subordinated Notes”).

This issue will be composed of three tranches with a perpetual maturity and a nominal amount of €1 billion each, with respective redemption options (Non Call) at 4, 5 and 6 years, and bearing interest at 7.00%, 7.25% and 7.50% respectively until these dates. Interest on the Super-Subordinated Notes will be capitalized.

These initial interest rates of each tranche of the Super-Subordinated Notes will be revised on the first early redemption date at the option of the Company of the relevant tranche and every 5 years thereafter, on the basis of the 5-year Euribor mid-swap rate increased by the initial margin retained for the initial fixed interest rate and the applicable Step-Up margin.

The interest rate would also be adjusted by applying the Step-Up margins from the first early redemption date:

-              4-year Super-Subordinated Notes: 1.50% as of the fifth year then 3.00% as of the eighth year onwards;

-              5-year Super-Subordinated Notes: 0.75% from sixth year then 2.75% from the eighth year onwards;

-              6-year Super-Subordinated Notes: 0.50%% from the seventh year then 2.50% from the eighth year onward.

In the event of:

1. a third party, acting alone or in concert, holds more than 30% of the share capital of Issuer;
2. non-approval by the shareholders’ general meeting of a project of issuance of shares (or any other securities giving right to shares of the Issuer), submitted by the board of directors of the Issuer, enabling the French State to convert in shares of the Company all or part of the TSS held by the French State ; or
3. implementation by the Issuer, without prior consent of the French State, of an issuance of shares (or other securities giving right to shares of the Company), except if such issuance of shares (or other securities giving right to shares of the Company) is realised with preferential subscription rights or with priority subscription period and that the French State is able to subscribe such shares (or other securities giving right to shares of the Issuer) by way of set-off (compensation de créances) with the Super-Subordinated Notes,

The Company may, at its sole discretion, redeem in full the Super-Subordinated Notes remaining outstanding, failing which the applicable interest rate shall be increased by an additional margin of 5.50% per annum from the date of occurrence of any of the events referred to in (i), (ii) or (iii). Such interest rate adjustments shall be cumulative, provided, however, that the cumulative adjustments shall not exceed 11.00% per annum.

It is specified that in the event that the interest rate resulting from the above principles is lower than the minimum rate provided for by the decision of the European Commission of April 5, 2021 authorizing the subscription of Super-Subordinated Notes by the French State, the applicable rate will be equal to the latter rate.

The Company would be granted with the option to defer the payment of interest, in whole or in part, at the Company's option, the payment of inter