Finnair is planning a rights issue of up to EUR 600 million to strengthen its financial position
Finnair Plc Inside information 6 October 2023 at 8.00 a.m. EEST
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 rights issue is supported by Finnair’s main shareholders, including the State of Finland.
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Finnair Plc (the “Company”) has today published its notice to convene an Extraordinary General Meeting (“EGM”) for the purpose of authorising the Board of Directors to resolve on a share issue (the “Offering”) with pre-emptive subscription rights for the Company’s existing shareholders to raise gross proceeds of up to EUR 600 million.
The Offering will be conditional on the shareholders of the Company granting the authorisation sought at the EGM to be held on 27 October 2023. The Offering is expected to be completed during the fourth quarter of 2023, subject to market conditions.
Background to the Offering
The gross proceeds from the Offering will be used to strengthen Finnair’s balance sheet and financial position in order to position the Company to better manage its outstanding financial liabilities, to support the execution of its strategy to drive sustainable profitable growth, and ensure ability for future investments. The Offering is designed to position the Company to meet its key financial targets of 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 to 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)
The Offering is supported by Finnair’s main shareholders, with the remainder fully underwritten on a standby basis
The State of Finland, Finnair’s largest shareholder (representing approximately 55.8 per cent of the shares in the Company, including treasury shares), has informed the Company that it supports the proposal made to the EGM and intends 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 shareholders Varma Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company and Ilmarinen Mutual Pension Insurance Company, representing approximately 3.4 per cent of the shares in the Company, including treasury shares, have irrevocably undertaken to vote in favour of the proposal at the EGM and to subscribe for their respective pro rata share of the Offering, subject to customary terms and conditions.
The remainder of the Offering (40.7 per cent) is fully underwritten on a standby basis, subject to customary terms and conditions. Deutsche Bank Aktiengesellschaft and Nordea Bank Abp would act as the Joint Global Coordinators, lead managers and underwriters of the Offering.
Sanna Suvanto-Harsaae, Finnair’s Chair of the Board says:
“Building a sustainable balance sheet is a core part of our strategy to drive sustainable growth by connecting Europe, North America and Asia via our Helsinki hub.
After successfully responding to the external shocks of COVID-19 and the closure of Russian airspace, we have shifted our strategy, restored the company’s profitability and repaid our hybrid bond. The rights offering is the logical next step and will result in a return to a more normal, sustainable capital structure. It will support the continued execution of our strategy and enables us to continue to enhance shareholder value, also through shareholder returns.”
Topi Manner, Finnair’s CEO says:
“After successfully redirecting our network, optimising our fleet and implementing many key strategic initiatives, Finnair’s operations are more profitable today than in 2019. Building a strong balance sheet through the rights offering will further reduce our cost of capital and strengthen our resilience. Very importantly, it will also enable future investments and increase flexibility on actions required to fulfil our long-term carbon neutrality target.
I am proud of the way the Finnair team has performed throughout the difficult recent years. It has been a privilege to work in this extraordinary team. I am fully committed to this capital raise project and feel confident in leaving a strong Finnair in excellent and capable hands, with a bright future ahead after completion of the rights offering”.
Further information
Finnair communications, 358 9 818 4020, comms@finnair.com
Briefings
Finnair will hold a press conference (in Finnish) today on 6 October 2023 at 11:00 a.m. Finnish time at its office at Tietotie 9, Vantaa. It is also possible to participate in the press conference via a live webcast at https://finnairgroup.videosync.fi/2023-10-06-mediatilaisuus
An English-language telephone conference and webcast for analysts will be held today at 2:00 p.m. Finnish time. To access the conference, kindly first register at http://palvelu.flik.fi/teleconference/?id=10011918
After the registration, you will be provided with phone numbers and a conference ID. To join the live webcast, please register at https://finnairgroup.videosync.fi/2023-10-06-conference-call
Company presentation event
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.
- At the end of the second quarter of 2023 the accrued interest from the Capital Loan was EUR 32.8 million, the margin was 3.5%, and the reference rate was 1.851% (12-month Euribor). The current reference rate is 4.102% which 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.
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.
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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 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 PLC
Distribution:
NASDAQ OMX Helsinki
Principal media
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.