US bankruptcy court to rule on authorizing restructuring of airBaltic's debts

RIGA - The United States Bankruptcy Court for the Southern District of New York will today rule on authorizing the restructuring the financial obligations of Latvia's airBaltic airline under the Chapter 11 procedure established by U.S. law, according to publicly available information.

The court’s docket includes an order allowing the debtor to receive financing after the commencement of the Chapter 11 process.

The Latvian national airline has secured a binding commitment from financiers to provide EUR 350 million in new financing to strengthen the company’s liquidity during the Chapter process (debtor-in-possession, or DIP, financing).

The financing was arranged by Strategic Value Partners, and Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital Management, and Strategic Value Partners have committed to providing it. The interest rate is SOFR plus 8 percent, or currently approximately 12 percent.

The court’s docket also includes an order ensuring adequate protection for creditors whose claims were secured prior to the commencement of the Chapter 11 process.

The petition to commence the Chapter 11 process was filed by airBaltic and its subsidiaries, Air Baltic Training and Baltijas Kravu Centrs. Accordingly, the court plans to consider the petition for joint administration of the case.

The court also plans to consider the petition to grant protection under the automatic stay, an application regarding the management of funds, including a plan to allow the debtor to continue using its existing cash management systems and bank accounts, as well as an application regarding employee salaries and benefits, including a plan to allow employee benefit programs to continue under normal business operations and to pay employee obligations related to these programs that arose prior to the commencement of the Chapter 11 process.

The court’s docket also includes a motion seeking permission for airBaltic to pay claims arising prior to the commencement of Chapter 11 process to suppliers and secured creditors based outside the U.S., as well as a tax motion seeking permission for airBaltic to pay certain taxes and fees.

Also scheduled for consideration is a motion regarding the customer loyalty program, which would allow airBaltic to maintain its existing loyalty programs and fulfill related customer obligations that arose prior to the commencement of the Chapter 11 process, as well as a motion regarding critical aviation contracts, an insurance motion, and a case administration motion.

The court also plans to consider a motion to extend the deadline for the submission of schedules and financial statements, a motion regarding the submission of a consolidated list of creditors, as well as a motion appointing Epiq Corporate Restructuring as the agent for the administration of claims and notices by airBaltic debtors.

airBaltic CEO Erno Hilden previously noted that securing the planned financing of EUR 350 million is still subject to court approval, which is expected to be granted in the coming days.

In the coming months, airBaltic will engage all stakeholders in an effort to reach sustainable terms and an agreement that would allow the company to remain competitive in the future.

Hilden summarized that, following this process, the final outcome will be a so-called reorganization plan, which will need to be approved by the court. The process is expected to be completed by mid-2027.

Jurgis Sedlenieks, vice chairman of the airBaltic board, told LETA that the decision was made to initiate this procedure in the U.S. because the U.S. judiciary has the most extensive experience working with the aviation industry. According to him, U.S. courts have handled debt restructuring cases of airlines larger than airBaltic, so they have a clear roadmap and know the necessary steps.

As LETA reported, airBaltic has voluntarily initiated a U.S. Chapter 11 process to restructure its financial obligations while continuing its operations. At the same time, the airline has secured a binding commitment from financiers to provide EUR 350 million in new financing to strengthen the company’s liquidity and operations at an interest rate of approximately 12 percent.

Consequently, the previous plan to raise up to EUR 257 million at an annual interest rate of 25 percent from bondholders will not be implemented.

The airline indicates that Chapter 11 protection shields airBaltic from creditors’ claims until the restructuring of its liabilities is completed.

Chapter 11 is a well-established U.S. legal framework, recognized internationally and used regularly by U.S. and international airlines, that allows companies to restructure their finances and raise capital while continuing day-to-day operations under the supervision of the U.S. Court. airBaltic is using this process to address its financial obligations and achieve a more sustainable capital structure. airBaltic notes that Chapter 11 is not the legal equivalent of the Latvian legal protection process.

The company also reports that flights and customer service will continue as usual. All flights will operate according to the scheduled flight plan; existing tickets and reservations remain valid, and passengers can continue to purchase tickets and travel with airBaltic as before.

The airline states that airBaltic has received a binding commitment from financiers to provide EUR 350 million in new financing to ensure the company’s liquidity and operations during the Chapter 11 proceedings (debtor-in-possession, or DIP, financing).

The financing was arranged by Strategic Value Partners and funded by Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital Management and Strategic Value Partners, to provide liquidity and support operations during the Chapter 11 process. The interest rate is SOFR plus 8 percent (i.e., approximately 12 percent).

The company tentatively plans to complete the Chapter 11 proceedings by June 2027, subject to the necessary U.S. Court approvals and other conditions of the proceedings.

The restructuring process is taking place under the supervision of the United States Bankruptcy Court for the Southern District of New York (the U.S. Court).

The company will seek customary U.S. Court approval to access this financing in the coming days. Together with cash generated from ongoing operations, the financing is expected to provide sufficient liquidity for airBaltic to continue its operations during the Chapter 11 process.

During the Chapter 11 proceedings, airBaltic will continue its day-to-day operations, and the company’s current management board and supervisory board will continue to fulfill their duties. The company will continue to meet its obligations to suppliers, service providers, and other business partners in the usual course of business.

As previously reported, under the previous plan, airBaltic bondholders were expected to meet on Tuesday, September 15, to decide on the terms of bridge financing of up to EUR 257 million at a 25 percent interest rate.

airBaltic indicated at the time that it had reached an agreement with certain existing bondholders and third-party financing providers on the terms of bridge financing of up to EUR 257 million; however, approval from airBaltic’s bondholders and shareholders is still required to receive the planned financing.

The airBaltic board has approved a business plan that initially called for raising EUR 225 million in interim financing to improve liquidity, using the existing collateral package for the 2029 senior bonds.

In the long term, the company is expected to be recapitalized with more than EUR 225 million in new debt and EUR 100 million in new equity, while a portion of the existing 2029 bonds will be converted into company equity, with the remainder replaced by new, smaller debt of up to EUR 125 million.

In August, airBaltic bondholders approved the capitalization of the interest payments on the next two bond maturities, as well as several other measures that provide the airline with additional flexibility in implementing its revised business plan.

Bondholders supported the capitalization of interest payments due on August 14 and November 14 of this year, adding them to the principal amount of the bonds rather than paying them in cash. A decision was also made to grant a temporary exemption from minimum liquidity requirements through November 2026.

The airBaltic group’s revenue last year increased by 4.2 percent compared to 2024, totaling EUR 779.344 million. Meanwhile, airBaltic group’s losses last year totaled EUR 44.337 million, which is 2.7 times less than in 2024. The airline carried a total of 5.2 million passengers in 2025, which is 1 percent more than in 2024.

Last summer, Germany’s national airline, Lufthansa, became a shareholder in airBaltic. Currently, the Latvian government owns 88.37 percent of airBaltic’s shares, Lufthansa holds 10 percent, the company Aircraft Leasing 1, owned by Danish businessman Lars Thuesen, a financial investor, holds 1.62 percent, and 0.01 percent is held by other shareholders. The company’s share capital is EUR 41.819 million.