Positioning for post-COVID future – Recapitalisation by Shareholders and Amendment of Financial Indebtedness

The Company is pleased to announce that the Company, the Shareholders and all Senior Lenders, among others, have entered into a lock-up agreement (the "Lock-up Agreement") to implement the Transaction, which is currently scheduled to be completed in Q1 2021.

As part of the Transaction, the Shareholders, through their affiliates (the "New Money Lenders"), have today entered into a CHF 200 million senior secured interim liquidity facility (the “Interim Facility”) with the Company. The Interim Facility is expected to become available to the Company in the coming days at which time the Lock-up Agreement will also become effective. The Interim Facility is repayable upon the completion of the Transaction or, if later, 6 months after the date of the Interim Facility.

Importantly, this Interim Facility, as well as the Transaction more broadly, will allow the Company to weather the current headwinds caused by the dramatic downturn in travel demand as a result of COVID‑19, and position itself for a post-COVID future as a leaner business. No alternative scenarios would have given the Company the opportunity to make such a transition.

Overview of the Transaction

The COVID-19 pandemic has created a challenging operating environment for the Company, as well as players across the entire aviation value chain. The Shareholders fully recognise that these circumstances are purely a result of external factors and have approached the situation with a principle of fair burden sharing, with each party doing its part to support the continuity of the Company’s business and the local communities where the Company operates.

The Transaction aims to provide stability to the Company by addressing its medium-term liquidity needs, as well as create sufficient runway for the business to recover its value through a stable capital structure. With the successful completion of this Transaction, the gategroup board and management believe the Company will be better positioned to navigate both the near-term market uncertainty and an extended period of post-COVID recovery.

The key terms of the Transaction are as follows:
 

• New money injection: upon completion of the Transaction, the New Money Lenders will make available CHF500 million of new funding to the Company in the form of a CHF 25 million subscription for equity in the Company and CHF 475 million of subordinated convertible loans. The convertible loans will mature on 31 March 2027 and will accrue PIK interest at a rate of 12.5% per annum. Such loans will be guaranteed by each borrower and guarantor under the SFA but will be fully subordinated to the claims of both the lenders under the SFA and holders of the CHF 350 million bonds (ISIN CH0353945394) issued by gategroup Finance (Luxembourg) S.A. and guaranteed by the Company (the "CHF Bonds"). The proceeds of the new money injection will refinance and replace the Interim Facility by way of a cashless rollover; and
   
• Extension of existing debt maturities
   
• the maturity of the Group’s facilities under the SFA will be extended by 5 years to 20 October 2026 and certain other technical amendments will be made to the SFA. The interest rate applicable to loans outstanding under the SFA will remain unchanged (although certain margin step-up provisions will no longer apply). Subject to certain conditions, the Company may elect to capitalize all or part of the interest; and
   
• the maturity of the CHF Bonds will be extended by 5 years to 28 February 2027. In addition, the rights of holders of the CHF Bonds as a result of a change of control event under the CHF Bond terms upon Temasek and/or any of its affiliates acquiring more than 50% of the shares or voting rights in the Company, shall be waived. No changes will be made to the interest rate under the CHF Bonds, and interest will continue to be payable in cash.

Also, concurrent with the completion of the Transaction, the maturity of the syndicated facility (the “Holdco Facility”) made available by certain bank lenders to Saffron Asset Holding Limited ("Holdco"), which owns or controls approximately 99% of the outstanding shares of the Company, will be extended by 5 years to 3 April 2026 and certain other technical amendments will be made to the Holdco Facility. Interest rates under the Holdco Facility will also be reset and all accrued interest will be paid on a PIK basis provided that Holdco may elect to pay accrued interest in cash.

The amendments to each of the SFA, the CHF Bonds and the Holdco Facility, and the provision of the new money injection, are all inter-conditional. Completion of the Transaction is subject to the execution of definitive documentation, customary conditions and regulatory and other approvals.

Support for the Transaction

The Company is pleased to announce that the New Money Lenders, each Senior Lender and each lender under the Holdco Facility have agreed and executed the Lock-Up Agreement, in which the parties have agreed to support the Transaction.

Implementation

It is expected that the amendments required to the SFA, the CHF Bonds and the Holdco Facility pursuant to the Transaction will be effected (in whole or in part) in accordance with an English law restructuring plan under Part 26A of the Companies Act 2006 (the "Plan").

Further details of the Transaction, the terms of the Plan and information on how creditors can vote on the Plan will be shared with the creditors in the coming weeks. gategroup expects completion of the Transaction to occur in Q1 2021, subject to regulatory and antitrust analysis.

Next Steps

The Group is working to finalise the implementation mechanics for the Transaction and will issue the relevant documentation to its financial creditors as required.

Any holder of the CHF Bonds who wish to discuss the Transaction should contact GLAS Specialist Services Limited, the information agent in respect of the Transaction, using the contact details below:

GLAS Specialist Services Limited
45 Ludgate Hill
London
EC4M 7JU
Email: LM@glas.agency
Telephone: +44 (0)20 3597 2940

Forward-Looking Statements    
This publication contains forward-looking statements and other statements that are not historical facts. The words “believe”, “anticipate”, “plan”, “expect”, “project”, “estimate”, “predict”, “intend”, “target”, “assume”, “may”, “will” “could” and similar expression are intended to identify such forward-looking statements. Such statements are made on the basis of assumptions and expectations that we believe to be reasonable as of the date of this publication but may prove to be erroneous and are subject to a variety of significant uncertainties that could cause actual results to differ materially from those expressed in forward looking statements. Among these factors are changes in overall economic conditions, changes in demand for our products, changes in the demand for, or price of, oil, risk of terrorism, war, geopolitical or other exogenous shocks to the airline sector, risks of increased competition, manufacturing and product development risks, loss of key customers, changes in government regulations, foreign and domestic political and legislative risks, risks associated with foreign operations and foreign currency exchange rates and controls, strikes, embargoes, weather-related risks and other risks and uncertainties. We therefore caution investors and prospective investors against relying on any of these forward-looking statements. We assume no obligation to update forward-looking statements or to update the reasons for which actual results could differ materially from those anticipated in such forward-looking statements, except as required by law.