Air Baltic forced to pay up in second run at junk refinancing

Air Baltic is having to pay the highest coupon seen in Europe’s junk bond market this year to pull off a last-minute refinancing deal, even with Latvia’s government supporting the sale. The Latvian airline is marketing a E340m junk bond with a yield of 14.5%, to push back the need to repay debt maturing in two months, according to a person with knowledge of the deal. The high rate pulled in over E850m of orders, enabling it to upsize the offer and trim the pricing. At that level, it would still be the highest coupon seen in the European high-yield bond market since September, when Adler Group paid a 21% coupon, according to data compiled by Bloomberg. It would mean the company paying nearly E50m in interest costs every year. It’s Air Baltic’s second attempt at a bond sale, and this time the Latvian government looks set to help get it over the line. Investors are demanding higher rates for its debt since Russia’s invasion of Ukraine, the company’s CEO Martin Gauss said in January. The company was forced to shelve a planned junk sale in October as fears over geopolitical turmoil unsettled markets. Now the government has parliamentary approval to purchase as much as E136m of the debt. The state could buy the bonds alongside private investors, on the same terms, transport minister Kaspars Briskens said last week.<br/>