As part of measures aimed at improving the financial stability of beleaguered Russian airline Aeroflot and its debt restructuring under letters of credit (L/Cs), its board of directors has approved an additional issue of up to 5.4 billion shares.

The Russian state may participate in the new issue, thereby bailing out the airline that suspended all international flights in the immediate aftermath of the conflict in Ukraine. Some routes have since reopened.

Board recommendations

The board has recommended an increase in the airline's charter capital through an additional share issue and has recommended shareholders to increase the authorised capital by issuing an additional 5,424,308,073 shares.

The actual volume of placement will depend on the final capital demands of the airline as part of debt restructuring under L/Cs as well as the exercise of any pre-emptive rights and participation in an open subscription according to an Aeroflot statement.

Massive capital boost

The board is recommending shareholders to approve the placement price of 34.29 roubles (US$0.55), which the board says is a share value based on an independent appraiser's report.

The issue could more than triple the airline's current charter capital of 2,444,535,448 ordinary shares, and the new shares could constitute up to 69 per cent of the increased charter capital.

State support

Moscow is considering a 107 billion roubles (US$1.34 billion) rescue package from its National Wealth Fund to recapitalise the flagship airline according to Russia's Interfax news agency.

The Russian state currently holds a 57.34 per cent stake in Aeroflot, with the remainder listed on Russia's Moscow Exchange.

Financial woes

Aeroflot's share price has slumped since days before Russia's invasion of Ukraine. A new law issued by Moscow meanwhile has forced Aeroflot to terminate its depository agreement with Deutsche Bank, which regulates depository receipts for the circulation, issuance, and cancellation of the company's shares.

Aeroflot's statement on the board's recommendations for the airline's financial stability and debt restructuring under L/Cs can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.