Utair suggests a new debt restructuring plan

Utair was struggling financially even before the Covid-19-related crisis (Utair)

Utair, Russia’s sixth largest passenger airline, which was struggling financially even before the Covid-19-related crisis, has presented its creditors with a new debt restructuring plan, blaming the Coronavirus pandemic for a plunge in passenger numbers and revenue.

The airline is already refusing to cover the pending interest rate payments on its Sberbank loan and is now suggesting the restructuring of its entire pending amount, which has now reached 2.7 billion roubles, by aggregating it with its main loan, according to RBC outlet.

Last summer, Utair was counting on partly covering its pending debts by selling 50 per cent of its share in ground handling operator UTG, but the crisis has made that plan unviable.

The airline is also looking to extend its Sberbank payment period – by increasing the grace period from two to four years – during which no payment of the body of the 12-year loan would be made.

At the same time, Utair wants to extend the grace period for paying interest on the loan from one to three years and is also seeking to reduce the loan’s interest rates from 9-10 per cent down to seven per cent.

Apart from the Sberbank loan, Utair has two syndicated credits with 11 banks – which amount to a 12-year facility for 27.7 billion roubles, and a seven-year agreement for 15.3 billion. With regard to the former, the airline is suggesting lengthening the payments term to 35 years, with a 0.01 per cent interest rate, and it is also asking for favours on the second loan – namely, writing off 70 per cent (10.7 billion roubles) and paying the remainder over a period of 35 years at the same 0.01 per cent interest rate.

With such agreements and the proffered Sberbank arrangement all in place, Utair would then be able to start paying off the residual 4.6 billion roubles debt over a four-year time frame. Since December 2018, due to cash shortages, the airline has, on a number of occasions, declared a default on the seven-year loan.

In the meantime, Rossiya Bank, one of Utair’s largest creditors, has purchased parcels of the airline’s debts from other banks, according to RBC. Rossiya Bank has won the tender for sales of Utair’s debts launched by Moscow Credit Bank. It also bought out Utair’s debts from Orenburg Bank and Surgutneftegazbank.

According to some data, Rossiya is acquiring the debts for 25 per cent of the initial loan amount, excluding interest or default penalties. These debts are part of the 23.7 billion and 15.3 billion rouble loans. Once and if these deals are completed, Rossiya will have consolidated some 37 per cent of Utair’s total debts, making it the airline’s largest creditor, surpassing Trust Bank, which holds 35.6 per cent, or 13.88 billion roubles, of Utair’s total debt.