Air France-KLM Announces Deeply Discounted Rights Issue To Repay State Aid

Air France-KLM announced a EUR 2.26 billion rights issue as part of its effort to recapitalize the EUR 4 billion hole in its balance sheet and repay state aid. The second rights issue since the start of the pandemic will be heavily dilutive for nonparticipating shareholders at a price of EUR 1.17 per share and three shares for every existing share held, translating into a 75% dilution. Our existing forecast and fair value estimate made provision for a EUR 3 billion rights issue at EUR 2.50. We expect to lower our EUR 5.20 fair value estimate as a result of the deep discount. We have had the group on an extreme uncertainty rating for some time owing to its weak balance sheet. We will revisit our rating once it its clear that the group is adequately recapitalized.