Finnair announces the terms and conditions of its fully underwritten rights offering of approximately EUR 570 million

Finnair Plc             Inside Information                27 October 2023 at 4.00 p.m. EEST

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The Board of Directors of Finnair Plc (“Finnair” or the “Company”) has today resolved on a fully underwritten rights offering of approximately EUR 570 million (the “Offering”). In the Offering, the Company will offer for subscription, based on pre-emptive rights for existing shareholders, a maximum of 19,012,413,069 new shares (the “Offer Shares”) based on the authorisation granted by the Extraordinary General Meeting of the Company held on 27 October 2023. The rights issue is aimed at reducing Finnair’s financing costs, support strategy execution to drive sustainable profitable growth, and ensure ability for future investments. Through the rights issue Finnair also seeks to reinstate the Company's ability for shareholder distributions. 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 570 million by offering up to 19,012,413,069 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 31 October 2023 (the “Record Date”).
• Each two (2) Subscription Rights carry the right to subscribe for twenty-seven (27) Offer Shares at the subscription price.
• The subscription price is EUR 0.03 per Offer Share (the “Subscription Price”).
• The Subscription Price implies a discount to the theoretical ex-rights price (“TERP”) of 39.4%, based on the closing price of the Finnair’s share on Nasdaq Helsinki Ltd (“Nasdaq Helsinki”) on the last trading day immediately preceding the setting of the terms and conditions (26 October 2023).
• The first trading date of Finnair’s shares without Subscription Rights is 30 October 2023.
• The subscription period for the Offer Shares commences on 3 November 2023 at 9.30 a.m. Finnish time and ends on 17 November 2023 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 between 3 November 2023 and 13 November 2023.
• The Offering is fully underwritten, subject to customary terms and conditions:
  • Finnair’s major shareholders, the State of Finland (representing approximately 55.8 per cent of all shares in the Company), Varma Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company and Ilmarinen Mutual Pension Insurance Company (in aggregate representing approximately 3.4 per cent of all shares in the Company), have each irrevocably committed to subscribe for their respective pro rata share of the Offering subject to customary terms and conditions (together, “Subscription Undertakings” and each a “Subscription Undertaking”).
  • Deutsche Bank Aktiengesellschaft (“Deutsche Bank”) 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 customary 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 Undertakings.
• Deutsche Bank and Nordea act as the joint global coordinators, lead managers and underwriters of the Offering (together, the “Joint Global Coordinators”).

Background

The Offering is aimed at reducing Finnair’s financing costs, supporting the implementation of the strategy for sustainable profitable growth in the new operating environment shaped by the COVID-19 pandemic and the closure of Russian airspace and ensuring the Company’s ability for future investments. Through the Offering the Company seeks to strengthen its balance sheet and financial position in order to allow the Company to better manage its outstanding financial liabilities, the amount of which has increased significantly in recent years due to the unprecedented changes in the operating environment. The Offering is also designed to position the Company to meet its key financial targets: a comparable operating profit margin of 6 per cent by the end of 2025, 1-2x net debt to comparable EBITDA by the end of 2025 and reinstate the Company’s ability for shareholder distributions from 2025 onwards (based on 2024 earnings). The Company will use the net proceeds from the Offering to pay the portion of the EUR 400 million capital loan (the “Capital Loan”) that remains outstanding after the Offering and the accrued interest thereon. This, together with the earlier redemption on 1 September 2023 of the Company’s capital securities in the aggregate nominal amount of EUR 200 million (hybrid bond), is expected to provide a sustainable balance sheet and significantly reduce the Company’s financing costs.⁽¹⁾

Assuming that all of the Offer Shares are subscribed for in the Offering, the Company will raise net proceeds of approximately 558 million euros.

Terms of the Offering (in brief)

Shareholders will receive one (1) Subscription Right for each share of the Company held on the Record Date, 31 October 2023. Each two (2) Subscription Rights carry the right to subscribe for twenty-seven (27) Offer Shares at the Subscription Price (the “Primary Subscription Right”). The Subscription Rights will be registered on the shareholders’ book-entry accounts on 1 November 2023 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 1,408,726,198 shares to a maximum of 20,421,139,267 shares.

The Subscription Price is EUR 0.03 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 Deutsche Bank and Nordea or, when such subscribers have not been procured, to Deutsche Bank 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 31 October 2023. The shares are traded with the right to participate in the Offering up to and including 27 October 2023. The subscription period for the Offer Shares commences on 3 November 2023 at 9.30 a.m. Finnish time and ends on 17 November 2023 at 4.30 p.m. Finnish time. The Subscription Rights are freely transferable and expected to be subject to trading on Nasdaq Helsinki between 3 November 2023 and 13 November 2023. Subscription Rights that remain unexercised at the end of the subscription period on 17 November 2023 at 4.30 p.m. Finnish time will expire without value.

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 6 November 2023 and end on 24 November 2023.

Finnair will announce the final results of the Offering on or about 23 November 2023.

Subscription commitments and underwriting

The State of Finland, Finnair’s largest shareholder (representing approximately 55.8 per cent of all shares in the Company), has irrevocably committed to subscribe for its pro rata share of the new shares on the basis of subscription rights allocated to it. In the Offering, the State of Finland expects to pay the Subscription Price of the shares by offsetting the aggregate Subscription Price against a corresponding amount of the principal of the Capital Loan.

The Company’s other major shareholders Varma Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company and Ilmarinen Mutual Pension Insurance Company, representing approximately 3.4 per cent of all shares in the Company, have irrevocably committed to subscribe for their respective pro rata share of the Offering, subject to customary terms and conditions.

Deutsche Bank and Nordea have entered into the Underwriting Agreement with the Company pursuant to which they have severally agreed, subject to customary 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 Undertakings, or to subscribe for such Offer Shares themselves.

Indicative timetable of 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 30 October 2023. The Finnish Prospectus and the English language translation of the Finnish Prospectus that contains a Swedish language translation of the summary, and the documents incorporated therein by reference (together, the “Offering Documents”), will be available on or about 31 October 2023 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 Offering Documents will be available on or about 31 October 2023 on the website of Nordea at www.nordea.fi/finnair. The English language offering circular and the documents incorporated therein by reference will be available on or about 31 October 2023 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.

Deutsche Bank and Nordea act as the Joint Global Coordinators, lead managers and underwriters of the Offering. Roschier, Attorneys Ltd. acts as the Company’s legal adviser and White & Case LLP acts as the Joint Global Coordinators’ legal adviser in the Offering.

Finnair plans to hold a virtual company presentation event (in Finnish) on 6 November 2023 at 5:00 p.m. Finnish time. Instructions for joining the event will be available later at Finnair's investor website.

1. At the end of the third quarter of 2023 the accrued interest from the Capital Loan was EUR 42.1 million, the margin was 3.5%, and the reference rate was 4.102% (12-month Euribor). The current reference rate reset on 31 August 2023, and if the Capital Loan is not repaid, the reference rate will reset again on 31 August 2024. The margin of the Capital Loan steps up to 5.0% in March 2024 pursuant to its terms, and the terms set out additional margin step-ups beyond 2024. The Capital Loan interest rate (margin and reference rate) applies to both, the principal amount and any deferred interest. Finnair also pays a utilisation fee of 3.0% on the Capital Loan principal amount.

FINNAIR PLC

Further information:

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

Distribution:

NASDAQ OMX Helsinki

Principal media

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The Joint Global Coordinators 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 Joint Global Coordinators 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 is a network airline, specialising in connecting passenger and cargo traffic between Asia, North America and Europe. Finnair is one of the oldest operating airlines in the world, celebrating its centenary in 2023. Sustainability is at the heart of everything we do – Finnair intends to reach carbon neutrality latest by the end of 2045. Customers have chosen Finnair as the Best Airline in Northern Europe in the Skytrax Awards for 13 times in a row. Finnair is a member of the oneworld alliance. Finnair Plc’s shares are quoted on the Nasdaq Helsinki stock exchange.