Fri 11/06/2020 05:43 AM
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Lenders to Trans Maldivian Airways, which was placed in receivership under FTI Consulting on Sept. 23 after lenders accelerated following Bain Capital’s default on its around $270 million loan debt, are in discussions to provide an around $30 million six-month super senior DIP finance facility, said three sources with knowledge. Continue reading for the Asia Core Credit team's analysis of Trans Maldivian Airways, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits. 

Some of the lenders - which include Bank of America Merrill Lynch, Carlyle, Davidson Kempner Capital Management, Deutsche Bank, Goldman Sachs, King Street Capital Management, and Sculptor Capital Management, as reported - could also be interested in acquiring the stranded airline, two of the sources said.

The current priority though is to furnish the DIP financing to ensure TMA has sufficient liquidity, said two of the three sources. The airline, which provides inter-island passenger services through a fleet of 56 Twin Otter aircraft to around 80% of the resorts in the Maldives, and which has been almost entirely without revenue since the onset of Covid-19 in early 2020, has a cash burn rate of around $4 million a month, said the same sources.

On recent calls, lenders have also debated whether better value could be obtained by putting the airline on sale in the new year, or to continue with a sale now, said all three sources. Although a teaser has been sent out to kick off the sale, that process has stalled pending opening of a data room, expected to occur after updated management projections are received, as reported.

However, two of the sources and a third source with knowledge also noted that bilateral discussions have continued with Bain Capital, which had been in a standstill agreement with the lenders before they accelerated and installed FTI Consulting as receivers, along with the ongoing debate around timing of the sale of the asset as possible causes of the delay.

Fitch downgraded the Maldives sovereign rating to ‘CCC’ from ‘B’ on (Nov. 5) and has previously projected a 16% decline in GDP for the country due to the impact of Covid-19 on tourism. Fitch data shows zero tourist arrivals during April, May and June.

In its Nov. 5 announcement, Fitch noted that the Maldives economy contracted 51.6% in Q2’20, when tourism came to a complete halt. The ratings agency said its forecast of a rebound of 16.0% in 2021 and 20.0% in 2022 reflects a low-base effect and is subject to downside risks related to the recovery in tourism demand, in particular from Europe.

As reported, 55% of TMA’s passengers in 2019 were from Europe, with 17% from China and 11% from the wider Asia ex-India.

The luxury tourism sector has performed strongly in recent years, and Fitch said it believes the Maldives is likely to attract large visitors numbers once Covid-19 recedes, but the recovery in arrivals is likely to be gradual.

Tourist arrivals rose to 1.7 million in 2019 from 1.2 million in 2015, Fitch noted.

FTI Consulting declined to comment. Bain Capital did not respond to a request for comment.

--Stephen Aldred, Simon Lee
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