(Adds Swissport statement)
LONDON/FRANKFURT, May 13 (Reuters) - A trio of distressed investors led by Apollo Global Management have bought debt of airport baggage handler Swissport and are holding talks with the company as it seeks cash to ride out the COVID-19 crisis, two sources familiar with the matter told Reuters.
Apollo along with SVP Global and Cross Ocean Partners now own a majority of Swissport’s senior secured bonds, term loans and revolving credit facilities, the sources said.
Swissport is seeking somewhere between 500 and 700 million euros ($542-$759 million) in rescue funds this year, one of the sources said, speaking on condition of anonymity as the matter is confidential.
The company is not eligible for Swiss state aid to the aviation sector because its majority ownership by China’s HNA Group does not yet permit financial support under the conditions laid down last week.
Swissport said that it was working hard to secure the necessary additional liquidity from lenders and investors. “We are confident that we can raise the necessary liquidity within the available time frame,” a company spokesman said.
HNA, Apollo and SVP Global declined to comment, while Cross Ocean Partners was not immediately available for comment.
Swissport’s business has been all but halted with airplanes grounded to prevent the spread of the novel coronavirus by travellers. Its global revenues are currently down by about 80%, the spokesman said.
Distressed investors have been circling as the COVID-19 crisis wreaks havoc on the global economy, looking to buy up otherwise-strong businesses on the cheap. This is one of the first instances of such an investment actually being made.
Swissport and its lenders are currently discussing creating a new layer of debt - a so-called basket - that will be senior to or equally ranking with its current senior debt, the sources said. That requires consent from the other creditors.
Negotiations will then focus on who will provide fresh funds on what terms, the people said, adding that Apollo, SVP and Cross Ocean as well as some existing PIK lenders and potential new investors are expected to provide the necessary money.
“HNA is not expected to inject fresh money, so it will likely be wiped out”, one of the people said, adding that it was too early to discuss details of a new capital structure.
The lenders are looking to finalise their discussions before the end of the summer to avoid Swissport becoming insolvent, the people added.
Swissport had more than 300 million euros in cash and cash equivalents in February, according to the company spokesman.
“Since then we have been able to further strengthen our liquidity”, he said, adding that this had resulted from drastic cost cutting measures - including shortened working - initiated in February and March.
Several private equity firms have been raising funds for distressed investment in recent years as many expected the global economy to slow in 2020 and beyond anyway.
The spread of the novel coronavirus has accelerated this trend dramatically, and Apollo founder Leon Black said at a recent conference in Berlin that he was prepared to deploy some of the funds in coming months.
$1 = 0.9224 euros Reporting by Abhinav Ramnarayan and Arno Schuetze, Additional reporting by Julie Zhu in HONG KONG and Oliver Hirt in ZURICH; Editing by Kirsten Donovan
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