Lenders to the world’s biggest baggage handling group Swissport have offered a rescue package that would restructure its €2.1bn of net debt and could transfer ownership to them from struggling Chinese conglomerate HNA Group.
The owners of €1.4bn of senior secured bonds issued by Swissport have promised to invest in the business to help it survive the pandemic, which has hit its operations hard with the grounding of flights.
Swissport needs funding of between €450m and €570m over the next 14 to 18 months, according to Reorg Research.
The investor group also includes the majority of those who own “payment in kind” notes — a type of debt where the borrower can pay interest in additional notes rather than cash — according to a person close to the proposal. The bondholders are said to include Apollo Global Management and SVP Global.
The proposed debt-for-equity swap was likely to involve the senior bondholders and PIK note holders taking control of the group, according to the person. This could wipe out the equity ownership of HNA and the more junior debt, depending on the final structure of a deal. HNA declined to comment.
A spokesman for Swissport said that it had been in discussions with lenders and investors since the start of the crisis.
“We have been exploring several possible options to raise additional liquidity and to put Swissport on a stable financial foundation,” he said. “These discussions are still ongoing and there has been significant and tangible progress, but nothing is finite yet.”
Swissport has attempted to restructure its loans to raise more money but has faced opposition from some lenders.
Northlight Group, a hedge fund that owns unsecured bonds issued by Swissport, filed a lawsuit against the company in New York this month. In its complaint, Northlight alleges that amendments Swissport recently made to loan agreements to allow it to issue €380m of new debt “eviscerate” Northlight’s rights by giving “superior rights to new lenders”.
Swissport has been under pressure since the pandemic halted almost all international travel, which is now only gradually starting up again.
Before the start of the crisis, it employed about 64,000 people. It said last month that it would halve its 8,500-strong UK workforce. In Britain, it provides services at London’s Gatwick and Heathrow and at a number of regional airports.
Jason Holt, chief executive of Swissport Western Europe, said the job cuts were necessary to “secure the lifeline of funding from lenders and investors to protect as many jobs as possible”.
Fall in Swissport’s ground handling business by the end of March
Swissport told its lenders in May that volumes in its ground handling business had fallen 90 per cent by the end of March, while its cargo business had slumped 30 per cent, meaning that its “liquidity position has accordingly become severely strained”.
Revenues at the company are forecast to be almost half what they were last year.
HNA has been reported to be looking for a buyer for Swissport in the past. It bought the company for $2.8bn in 2016, as part of a growing portfolio of global aviation, logistics and tourism businesses.
However, its fortunes have suffered since 2018 when, carrying heavy debts, it started to unwind a global M&A spree that at one point saw it own a quarter of Hilton Worldwide, a large property portfolio and a stake in Deutsche Bank.
In 2017, Swissport came under scrutiny from lenders over short-term loans it was providing to its heavily indebted Chinese parent company.
Additional reporting by Thomas Hale in Hong Kong