Finnair announces the terms and conditions of its fully underwritten rights offering of approximately EUR 500 million

Finnair Plc                                   Stock Exchange Release                   10 June 2020 at 9.00 a.m. EEST

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN, NEW ZEALAND, SINGAPORE OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

The Board of Directors of Finnair Plc (“Finnair” or the “Company”) has today resolved on a fully underwritten rights offering of approximately EUR 500 million (the “Offering”). In the Offering, the Company will offer for subscription, based on pre-emptive rights for existing shareholders, a maximum of 1,279,265,150 new shares (the “Offer Shares”) based on the authorisation granted by the Annual General Meeting of the Company held on 29 May 2020. The Company plans to use the proceeds from the Offering to strengthen its equity and liquidity position in the exceptional situation caused by the COVID-19 pandemic as well as to support the execution of Finnair’s strategy. The Offering is aimed at ensuring Finnair’s viability in the post-crisis environment as well as helping to reach its goal of sustainable, profitable growth. The Board of Directors of Finnair announces the terms and conditions of the Offering today.

The Offering in brief

• Finnair aims to raise gross proceeds of approximately EUR 500 million by offering up to 1,279,265,150 Offer Shares for subscription in the Offering with pre-emptive rights for existing shareholders in Finnair.
• Shareholders of Finnair will receive one (1) subscription right, in the form of a book-entry entitling them to subscribe for Offer Shares (the “Subscription Right”), for each share of the Company held on the record date 12 June 2020 (the “Record Date”).
• Each one (1) Subscription Right carries the right to subscribe for ten (10) Offer Shares at the subscription price.
• The subscription price is EUR 0.40 per Offer Share (the “Subscription Price”).
• The first trading date without Subscription Rights is 11 June 2020.
• The subscription period for the Offer Shares commences on 17 June 2020 at 9.30 a.m. Finnish time and ends on 1 July 2020 at 4.30 p.m. Finnish time.
• The Subscription Rights are freely transferable, and they are expected to be subject to trading on Nasdaq Helsinki Ltd (“Nasdaq Helsinki”) between 17 June 2020 and 25 June 2020.
• The European Commission has on 9 June 2020 issued a decision that the participation of the State of Finland in the Offering is compatible with the EU state aid rules under the Treaty on the Functioning of the European Union Article 107(3)(b). The European Commission has approved the participation of the State of Finland in the Offering based on, among others, the assumption that the State of Finland’s relative shareholding in Finnair would not increase (save for slight variations due to the technical organisation inherent to the Offering). Under the Commission's decision, the Company has agreed to certain conditions following the Offering, which include, among other things, limitations on management remuneration during the financial years 2020, 2021 and 2022 and a ban on acquisitions, restricting the Company from acquiring a stake of more than 10 per cent in competitors or other operators in the same line of business, including upstream or downstream operations for a period of three years from the Offering.
• The Offering is fully underwritten, subject to certain customary terms and conditions:
  • The State of Finland, representing approximately 55.9 per cent of the outstanding shares in the Company, has irrevocably committed to subscribe in full for the Offer Shares on the basis of Subscription Rights allocated to it (the “Subscription Undertaking”). Citigroup Global Markets Limited (“Citi”) and Nordea Bank Abp (“Nordea”) have entered into an underwriting agreement with the Company (the “Underwriting Agreement”) pursuant to which they have severally agreed, subject to certain terms and conditions, to procure subscribers for any Offer Shares that may remain unsubscribed for in the Offering, or to subscribe for such Offer Shares themselves, excluding the Offer Shares that are covered by the Subscription Undertaking.
• Citi and Nordea act as the joint global coordinators, joint bookrunners and joint lead managers for the Offering (together, the "Joint Global Coordinators").

Background

Finnair has a clear strategy to reach its goal of sustainable, profitable growth. The foundation for the strategy lies in the high quality and safety of its operations, Helsinki’s favourable geographic position, growing focus markets, clear goals to increase revenue, a modern, fuel-efficient fleet and in maintaining a strong balance sheet.

However, the COVID-19 pandemic and measures undertaken by local and national authorities to prevent the further escalation of the pandemic represent a unique challenge. The negative shock caused by the pandemic to the global economy has resulted in a significant deterioration of macroeconomic conditions in the markets in which Finnair operates, with a sudden and material reduction in the demand for the Company’s services, reinforced by travel restrictions imposed by public authorities around the world.

Finnair is determined to continue on its long-term strategic path despite temporary adjustments related to the COVID-19 pandemic, and aims to ensure that the Company remains a competitive airline company in the future. The Company’s management believes that air traffic will, upon expiration of the COVID-19 related travel restrictions, still be a growth business, in which Finnair targets sustainable, profitable growth, supported by a strategy based on a geographical competitive advantage and strong ownership structure.

To achieve the goals of the Company despite the exceptional circumstances, Finnair considers it prudent to seek to strengthen its balance sheet in these conditions and to lay a foundation for the successful execution of Finnair’s long-term strategy, ensuring the Company's viability in a post-crisis environment. The Offering is undertaken as part of Finnair's recapitalization plan, which will be carried out in the course of 2020, comprising in addition to the Offering of (i) already agreed amendments under the Company's revolving credit facility, including obtaining gearing covenant relief, (ii) entry into a new EUR 600 million pension premium loan agreement with Ilmarinen Mutual Pension Insurance Company, (iii) potential refinancing or solicitation of changes to the terms of the Company’s outstanding hybrid notes and (iv) possible sale and leaseback arrangements of unencumbered aircraft. The State of Finland has guaranteed 90 per cent of the pension premium loan’s principal, and the Finnish Government approved the guarantee on 20 May 2020. Nordea has guaranteed 10 per cent of the pension premium loan’s principal.

Terms of the Offering (in brief)

Shareholders will receive one (1) Subscription Right for each share of the Company held on the Record Date, 12 June 2020. Each one (1) Subscription Right entitles to subscribe for ten (10) Offer Shares at the Subscription Price (the “Primary Subscription Right”). The Subscription Rights will be registered on the shareholders’ book-entry accounts on 15 June 2020 in the book-entry system maintained by Euroclear Finland Oy. No fractions of the Offer Shares will be allotted and a Subscription Right cannot be exercised partially. As a result of the Offering, the total number of the shares in the Company may increase from 128,136,115 shares to a maximum of 1,407,401,265 shares.

The Subscription Price is EUR 0.40 per Offer Share. The Subscription Price includes a customary discount compared to the theoretical ex‐rights price based on the closing price of the Company's shares on Nasdaq Helsinki on the trading day immediately preceding the decision on the Offering. The Subscription Price shall be recorded into the invested unrestricted equity reserve of the Company.

Both holders of Subscription Rights and investors who do not hold Subscription Rights may submit orders to subscribe for any Offer Shares that have not been subscribed for pursuant to the Primary Subscription Right. Allocation of the Offer Shares subscribed for without the Subscription Rights will be allocated first to those that subscribed for Offer Shares also pursuant to Subscription Rights; second to those that have subscribed for Offer Shares without Subscription Rights only; and third to subscribers procured by Citi and Nordea or, when such subscribers have not been procured, to Citi or Nordea in accordance with, and subject to, the terms and conditions of the Underwriting Agreement. For exact allocation principles, please see the attached terms and conditions.

The Record Date for determining which holders of existing shares in the Company are entitled to receive Subscription Rights is 12 June 2020. The shares are traded with the right to participate in the Offering up to and including 10 June 2020. The subscription period for the Offer Shares commences on 17 June 2020 at 9.30 a.m. Finnish time and ends on 1 July 2020 at 4.30 p.m. Finnish time. The Subscription Rights are freely transferable and expected to be subject to trading on Nasdaq Helsinki between 17 June 2020 and 25 June 2020. Subscription Rights that remain unexercised at the end of the subscription period on 1 July 2020 at 4.30 p.m. Finnish time will expire without compensation.

The Offer Shares subscribed on the basis of Subscription Rights will be recorded on investors’ book‐entry accounts as interim shares corresponding to the Offer Shares (the “Interim Shares”) after subscriptions having been made and paid for. The Interim Shares are freely transferable, and trading with the Interim Shares, as a separate class of securities, is expected to commence on Nasdaq Helsinki on 18 June 2020 and end on 8 July 2020.

Finnair will announce the final results of the Offering on or about 7 July 2020.

Participation of the majority shareholder in the Offering and the Underwriting

The Company’s largest shareholder, the State of Finland, has irrevocably committed to subscribe in full for Offer Shares on the basis of Subscription Rights allocated to it. The Subscription Undertaking represents in total approximately 55.9 per cent of the Offer Shares.

Citi and Nordea have entered into the Underwriting Agreement with the Company pursuant to which they have severally agreed, subject to certain terms and conditions, to procure subscribers for any Offer Shares that may remain unsubscribed for in the Offering, excluding the Offer Shares that are covered by the Subscription Undertaking, or to subscribe for such Offer Shares themselves.

Indicative timetable for the Offering

The Company has submitted a Finnish language prospectus for approval by the Finnish Financial Supervisory Authority (the “Finnish Prospectus”). The Finnish Prospectus is expected to be approved on or about 12 June 2020. The Finnish Prospectus and the documents incorporated therein by reference will be available on or about 15 June 2020 at the website of the Company at www.finnair.com/osakeanti and at the registered office of the Company at Tietotie 9, FI‐01530 Vantaa, Finland. In addition, the Finnish Prospectus will be available on or about 15 June 2020 on the website of Nordea at www.nordea.fi/osakkeet. The English language offering circular and the documents incorporated therein by reference will be available on or about 15 June 2020 at the website of the Company at www.finnair.com/rightsissue.

The full Terms and Conditions of the Offering are attached to this release as Appendix 1.

Citi and Nordea act as the joint global coordinators, joint bookrunners and joint lead managers for the Offering (together, the Joint Global Coordinators) and OP Corporate Bank plc, Skandinaviska Enskilda Banken AB (publ) Helsinki Branch and Swedbank AB (publ) (in cooperation with Kepler Cheuvreux S.A.)  act as the co-lead managers for the Offering (together with the Joint Global Coordinators, the “Managers”). Roschier, Attorneys Ltd. acts as the Company’s legal adviser and White & Case LLP acts as the Managers’ legal adviser in the Offering.

FINNAIR PLC

Further information:

Finnair communications, 358 9 818 4020, comms@finnair.com

Distribution:

NASDAQ OMX Helsinki

Principal media

IMPORTANT NOTICE

This release is not an offer for sale of securities in the United States. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any part of the share issue in the United States or to conduct a public offering of securities in the United States.

The distribution of this release may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such relevant legal restrictions. The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Australia, Canada or Japan. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such aforementioned jurisdiction. This release is not directed to, and is not intended for distribution to or use by, any person or entity that is a citizen, resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would violate law or regulation or which would require any registration or licensing within such jurisdiction.

In any member state of the European Economic Area, other than Finland, and in the United Kingdom, this release is only addressed to and is only directed to “qualified investors” in that member state or in the United Kingdom within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the “Prospectus Regulation”).

This release is only being distributed to and is only directed at: (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). Any securities mentioned herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this release or any of its contents.

This release does not constitute a prospectus as defined in the Prospectus Regulation and, as such, it does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity in relation to any securities.

No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The Company or any of its respective affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss, however arising from any use of this

release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of the Company, its subsidiaries, its securities and the transactions, including the merits and risks involved.

The Managers are acting exclusively for the Company and no one else in connection with the rights issue. They will not regard any other person as their respective client in relation to the rights issue. The Managers will not be responsible to anyone other than the Company for providing the duties afforded to their respective clients, nor for giving advice in relation to the rights issue or any transaction or arrangement referred to herein.

This release includes “forward-looking statements.” These statements may not be based on historical facts, but are statements about future expectations. When used in this release, the words “aims”, “anticipates”, “assumes”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “should”, “will”, “would” and similar expressions as they relate to the Company and the transaction identify certain of these forward-looking statements. Other forward -looking statements can be identified in the context in which the statements are made. These forward-looking statements are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations, which, even though they seem to be reasonable

at present, may turn out to be incorrect. Such forward-looking statements are based on assumptions and are subject to various risks and uncertainties. Readers should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied in the forward-looking statements. The Company or any of its affiliates, advisors, representatives or any other person undertakes no obligation to review, confirm or to publicly release any revisions to any forward-looking statements to reflect events that occur or circumstances that arise following the date of this release.

Finnair in brief

Finnair is a modern premium network airline, specialising in passenger and cargo traffic between Asia and Europe. Helsinki’s geographical location gives Finnair a competitive advantage, since the fastest connections between many European destinations and Asian megacities fly over Finland. Finnair is the only Nordic network carrier with a 4-star Skytrax ranking and a member of the oneworld alliance. In 2019, Finnair’s revenues amounted to EUR 3,098 million and it carried over 14.7 million passengers. Finnair Plc’s shares are quoted on the Nasdaq Helsinki stock exchange.

Attachments: Terms and conditions of the offering