US Court Gives Final Approval to airBaltic’s Up-to-€350 Million DIP Financing
The US Bankruptcy Court for the Southern District of New York has granted final approval on 20 October to the DIP financing structure of Latvia’s national airline airBaltic, worth up to €350 million. The question of priority for lenders’ liens over bondholders’ collateral remains undecided.
The US Bankruptcy Court for the Southern District of New York signed a final order on 20 October approving the “debtor-in-possession” (DIP) financing structure of up to €350 million for airBaltic, Latvia’s national airline. DIP financing is new funding raised during a “Chapter 11” process to maintain liquidity and operations. The order does not mean the process or the airline’s reorganisation has been completed.
How the funding is divided
The mechanism has three tranches: a first of €175 million, a second of up to €125 million and a third of up to €50 million. Of the first tranche, €140 million had already been permitted by an interim order, and once the final order takes effect the company can receive the remaining €35 million by meeting the financing agreement’s conditions. Disbursement of the second and third tranches, up to €175 million in total, depends on the agreement’s conditions, restructuring milestones and a separate court ruling on collateral priority, known as a “Priming Order”.
A hearing on that matter is scheduled for 17 and 18 November. The court has not yet decided whether DIP lenders’ liens should rank ahead of liens on assets securing the 2029 bonds.
Court findings and objections
The court found that the financing was selected in a competitive process and is the best available in the circumstances, that its terms and fees are fair and reasonable, and that negotiations were conducted in good faith. The fees set out in the agreement were also approved. The “Ad Hoc Group”, a group of 2029 bondholders, had earlier objected, arguing that the process was not competitive enough and that it had an alternative financing offer.
Lenders and terms
The financing is backed by Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital Management and Strategic Value Partners. The interest rate is SOFR +8%, currently about 12%, and additional fees of up to €52.5 million apply. From the first tranche, airBaltic spent €78.925 million to buy out eight Airbus A220 aircraft and seven engines.
The airline says flights and customer service continue as normal. The process could conclude in mid-2027 with a court-approved reorganisation plan. The Latvian state owns 88.37% of airBaltic shares and Lufthansa owns 10%.
