Etihad scrambles to shore up $1.2b bonds before coupon crunch: sources

Etihad Airways is urgently examining ways to avert a technical default of some $1.2b in bonds indirectly linked to the Gulf airline, sources close to the situation said. An Amsterdam-based special purpose vehicle called SPV Equity Alliance Partners (EAP) was set up in 2015 and issued two bonds for Etihad and other airlines it partially owned at the time, including Alitalia and Air Berlin, which are both now insolvent. The bonds are quoted at a discount of more than 25c on the dollar after Alitalia entered special administration and Air Berlin filed for bankruptcy protection last year. Etihad could now end up spending hundreds of millions of dollars to keep the bond structure alive, although it is not legally obliged to do so as there is no cross-default provision in the bond documentation, the sources said. With more than $400m of EAP debt in the hands of United Arab Emirates investors, there is political and reputational pressure on the Abu Dhabi carrier to avoid a default in March and Etihad is holding internal talks to assess whether and how to support the bonds, the sources said. An Etihad spokesman declined to comment on the bonds, the proceeds of which were used to enter into separate debt obligations with each entity involved, with those of Alitalia and Air Berlin each amounting to around 19%.<br/>