Etihad Airways has relinquished its 40% stake in Air Seychelles, passing over full ownership of the airline to the Seychelles government. Etihad has also reduced the debt it is owed by 79%, while Air Seychelles will completely restructure after taking full ownership.
Seychelles pays $1 for full ownership
After months of negotiations, the Seychelles government will take over full ownership of Air Seychelles, with Etihad Airways giving up its 40% share in the carrier. Seychelles will pay just $1 to take on the 40% stake and has also negotiated a favorable debt repayment plan with Etihad.
Etihad has been looking to clean its hands of foreign airline investments in the wake of the COVID pandemic. The middle-eastern airline invested in Air Seychelles in 2012 and concurrently provided the carrier with a $25 million loan. The venture also received funding from bondholders, with Etihad and Air Seychelles sharing the responsibility of paying off the bonds before their due date in 2021.
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In a statement, Etihad said,
“This is a time of opportunity for both Air Seychelles and the country, as tourism starts to rebuild following the reopening of its borders. Seychelles is an important destination on Etihad’s global network, with bookings steadily increasing.”
Incumbent executives at Air Seychelles, including Remco Althuis, Chief Executive Officer, and Michael Berlouis, Chief Financial Officer, will remain in position until June 30th, 2021. A new board will come into force on June 30th, with Nane Nanty as the chairperson and Alan Mason as its co-chairman.
Seychelles President, Wavel Ramkalawan, visited the United Arab Emirates (UAE) in February. After negotiations, Etihad agreed to suspend all debt payments for 2021. An official statement at the time revealed the Seychelles government was looking for,
…. the return of the Etihad shares in order to reinstate the country’s national carrier as a fully Seychellois-owned entity.”
Etihad agrees to cut debt
Together with relinquishing its stake, Etihad has also agreed to cut the debt it is owed by a huge 79%. Air Seychelles owes Etihad debts exceeding $72 million, which both parties have been negotiating to restructure. After a 79% cut, Air Seychelles will pay $11.34 million rather than the full $72.3 million.
Additionally, Air Seychelles still owes bondholders $71.5 million, which it is seeking to repay at a reduced rate. If successful, the airline hopes to pay out a sum of approximately $20 million.
The Secretary of State in the Ministry of Finance, Patrick Payet, said,
“We are going to pay only 21 percent and this liability has been taken over by the government. Repayment will start from 2022 onwards. The second negotiation that we have is with the bondholders, where we are proposing to them to pay only $20 million.”
Air Seychelles seeks further funding
Air Seychelles is hoping to secure investment from African bank Trade Development Bank. The airline is seeking a $31.4 million loan which it will use to pay off its liabilities. $11.4 million of funding will be to pay off the Etihad debt, while $20 million will go towards paying bondholders.
What do you think of Etihad’s decision to sell its Air Seychelles stake for $1? Let us know your opinions in the comments.