Air France-KLM Bond Issue Lands Amid Rising Risks to Summer Fun

Airlines are rushing to the bond market, hoping to cash in on the return of summer travel in Europe to repair balance sheets broken by the pandemic, even as a deadly wave of virus variant threatens to strand tourists.

Carrier Air France-KLM is set to raise 600 million euros ($716 million) Thursday to pay down debt including some state aid, as it tests the limits of investor appetite for an industry subsisting off government support and a reopening trade threatened by the spread of the delta variant first identified in India.

“The Dutch and French state have basically done everything they can to keep the company afloat which will also give investors a bit of comfort,” said Shanawaz Bhimji, fixed income strategist at ABN Amro Bank NV. “The yield is quite generous.”

Even as Europeans flock back to their beaches and welcome Americans, German Chancellor Angela Merkel sounded a note of caution, urging for coordinated rules for travellers arriving in the European Union from areas where variants are spreading.

For now, credit markets exude calm: A gauge of credit risk for sub-investment grade companies retrenched on Thursday to its lowest level since February 2020.

Air France-KLM Bond Issue Lands Amid Rising Risks to Summer Fun

Wide-open credit markets are all the encouragement beleaguered airlines need to extend their dash for cash. They’ve issued a record 15 billion euros of bonds and loans so far this year, double the previous six months’ tally and only 4 billion euros short of all of last year, according to data compiled by Bloomberg.

The borrowing binge means the industry is now sitting on a debt pile of almost 50 billion euros, with about 70% incurred since the pandemic hit last year.

“Now with a pick-up of traffic, cashflows are rolling again,” Bhimji said. “But it will take quite some time before traffic levels are back in good shape, so investors should still brace for a bumpy 2021.”

And Air France-KLM hasn’t been weaned off state support. Alongside the bond sale it’s seeking financial aid from the Dutch government after obtaining a 4 billion-euro rescue from France in April.


Nine issuers are offering 10 tranches in Europe’s publicly syndicated debt market with a minimum volume of 3.87 billion-euro equivalent. Investors await Bank of England’s Monetary Policy Committee’s announcement amid rising inflation.

  • Among today’s deals, Italy is marketing a 7-year CCTeu bond, while Italian insurer Assicurazioni Generali SpA is selling a 500 million-euro sustainability Tier 2; utility SNAM SpA is also selling a 500 million-euro transition note
  • Base chemicals company Nobian Finance BV is offering a 425 million-euro sustainability-linked bond
  • A deluge of inflows swelled assets in Europe’s ETF industry to $1.475 trillion: data compiled by Bloomberg


Three Asian companies are offering dollar-denominated notes on Thursday, and another three mandated banks for potential bond sales. Average spreads on investment-grade debt in the region have tightened so far this month.

  • Spreads on the region’s investment-grade and high-yield U.S. currency notes were little changed on Thursday, according to a trader
    • Average premiums on IG debt have come in about 8bps so far in June, heading for a second monthly tightening, according to a Bloomberg Barclays Index
  • Concerns about the financial health of China Evergrande Group deepen with China Minsheng Banking Corp., one of its major creditors, saying it cut exposure to the property developer over the past nine months


Health-care services provider Ardent Health sold $300 million of junk debt on Wednesday, while NatWest Group Plc issued $750 million of perpetual notes amid a flurry of yankee bank deals.

  • At least four other high-yield borrowers are slated to sell debt ahead of the U.S. Independence Day holiday
  • Average junk-bond yields are just 9 basis points from the all-time low of 3.84% and spreads still hover near the 14-year low of 280 basis points
  • For deal updates, click here for the New Issue Monitor
  • For more, click here for the Credit Daybook Americas

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