Troubled China conglomerate HNA Group Co. Ltd. has reached a new debt-for-equity swap agreement with creditors that effectively forces it to cede control of its aviation services company Swissport International Ltd.
The deal includes a stipulation for a cash injection into the company to help it recover from the disruptions caused by the coronavirus pandemic.
Swissport said in a statement Monday that around $2.3 billion of the company's existing debt would either be extinguished or converted into equity under the swap agreement. The company, currently the world's largest provider of air cargo and airport ground services by volume of passengers and flights, said it had also secured around 500 million euros ($599.6 million) in long-term financing and a 300 million euro interim facility.
The deal is the culmination of months of negotiations to find a path to Swissport's eventual recovery. With the injection of new capital and the reduction of debt the company remains positive about its long-term outlook. The agreement should serve well to secure the company's immediate and long-term future, Swissport's chief executive officer Eric Bron said.
HNA Group originally acquired Swissport for $3 billion in 2015 as part of its worldwide acquisition spree that was heavily backed by debt. After the China government stepped in and forced HNA to liquidate some of its assets to pay unsustainable debts, Swissport's creditors attempted to take equity ownership of the company.
Swissport's largest senior-secured creditors include SVPGlobal, Barclays Bank, Apollo Global Management and King Street Capital Management. SVPGlobal has the most at stake.
The spread of the coronavirus this year has hurt Swissport's business as the international travel industry ground to a halt. In April, the company said it had to put more than 40,000 employees on temporary leave. Around 10,000 employees were made redundant and the company was left with a workforce of 15,000 people.
The company expects a gradual recovery of its business as more airlines choose to outsource ground handling services to reduce costs, Swissport's chief financial officer Peter Waller said. Swissport currently services flights at more than 300 airports worldwide.
