The company announced this Monday to the market that it intends to proceed with the operation. The interest rate on five-year bonds will only be known after the end of the offer.
TAP wants to reissue debt. This time it’s 300 million euros for institutional investors only, according to the Securities Market Commission (CMVM). The securities have a term of five years and the interest rate is not yet known.
“The company Transportes Aéreos Portugueses, S.A. announced today its intention to launch an offer aimed at institutional investors of senior bonds with an indicative aggregate nominal value of 300 million euros maturing in 2024 and interest rate to be set after the period of the offer”, announced the company in a statement to CMVM.
TAP’s announcement is a declaration of intent in which the air carrier says it intends to proceed with the operation but does not guarantee that it will do so. In other words, it will only be probing the market to understand the interest of large investors in the company’s new debt securities. “There is no guarantee that the offer will be completed or, if completed, the conditions for its completion,” says the company.
If the offer advances, the revenues achieved have two objectives. On the one hand, the “anticipation of the repayment of certain loans within the scope of TAP’s existing liabilities and extension of the respective average maturity term” and, on the other hand, the “payment of commissions and expenses related to the offer of bonds”.
In June, TAP carried out its first issue of bonds to the retail market. The airline recorded a total demand higher than supply and ended up raising 200 million euros in bonds maturing in 2023, in which it offered an interest rate of 4.375%.
This was the largest bond issue by a Portuguese company in the last seven years, only surpassed by a Portugal Telecom issue in 2012.
In the last two years, TAP has sought to reduce its exposure to the floating rate debt to control the risks involving the company, having moved from a floating rate debt equivalent to 92% of total debt at the end of 2017 to 68% in March 2019.
Besides the change in the interest rate profile, TAP is also taking advantage of debt issues to consolidate liabilities over a longer period of time by refinancing debt maturing in the near future, but also to strengthen cash flow and finance the current operation.
TAP’s net interest-bearing debt (excluding operating leases) stood at 691.3 million euros at the end of the first half of 2019, which represents an increase of 139.1 million euros (25.2%) compared to the end of 2018. In this period, TAP’s losses reached 120 million euros.