China’s embattled HNA cedes control of baggage handler Swissport to senior creditors in €1.9 billion debt-for-equity swap
- Hainan-based HNA, which had been trying to sell Swissport since its international expansion unravelled spectacularly, agrees to €1.9 billion of debt to be converted into equity or extinguished
- Swissport secures €500 million in new long-term facility and €300 million additional interim facility
Swissport is under new ownership after struggling Chinese conglomerate HNA Group reached an agreement with creditors over a debt-for-equity swap and an injection of additional cash that will help ensure the survival of the airport cargo handling company during the Covid-19 pandemic.
The stakeholders have agreed about €1.9 billion (US$2.3 billion) of existing debt will be converted into equity or extinguished, Swissport said in a statement on Monday. The Switzerland-based company has also finalised a €500 million long-term facility and a €300 million additional interim facility.
“Today’s binding agreements secure Swissport’s long-term future,” said Eric Born, Swissport International’s CEO, in the statement.
After the conglomerate ran out of cash, Swissport’s senior-secured creditors are set to take equity ownership of the firm. The investors include SVPGlobal, Apollo Global Management, Barclays Bank and King Street Capital Management.
Distressed investment specialist SVPGlobal, the investor with most at stake, was founded in 2001 by Victor Khosla and has invested more than US$27 billion of capital since inception.
Holders of Swissport payment-in-kind notes, which pay out in additional bonds rather than cash, have also endorsed the plan devised by the senior secured creditors.
In April, Swissport, the world’s largest provider of airport ground services and air cargo handling, said it had 40,000 employees on furlough and other state-supported programmes such as short-time work. The company made 10,000 employees redundant, leaving under 15,000 of its formerly 64,000-strong staff on active duty at the time.
The restructuring could mark a reversal of fortunes for Swissport as, armed with fresh funding ,it goes on the hunt for acquisitions.
“We expect to see increased outsourcing of ground handling services by airlines and being able to take volumes from some financially weaker competitors,” said Peter Waller, Swissport International’s chief financial officer.
Headquartered near Zurich Airport, Swissport services flights at 300 airports. Ratings agency Moody’s estimated on June 9 that significantly lower traffic will result in negative free cash flow of around half a billion euros this year.
“We look forward to working with management, and with the support of other stakeholders such as customers, employees and regulators, we are confident of Swissport’s future success,” the group of senior secured creditors said.
The SVPGlobal and Apollo-led deal is scheduled to be completed late this year.
Additional reporting by Yujing Liu
