Although the national airline of Latvia “airBaltic” was able to show relatively positive performance indicators last year, both by increasing turnover and working with profit, the company’s financial situation is still challenging. Negative equity and very high liabilities.
The 200 million euro bonds issued five years ago must be repaid or refinanced this summer. It was initially intended to do this by issuing new debt securities and refinancing its liabilities. However, seeing that the market offered to do it with very high interest, the plan was canceled and they started looking for other solutions to refinance.
“If the state decides that it is beneficial, for example, the state wants to finance some part of its funding, they cannot do it completely, but some part of it can be done by the state. [TV3: Jūs lūgsiet valsti izskatīt šādu iespēju?] There are general discussions on this topic, but I cannot comment on it at the moment,” says airBaltic Finance Director Vitolds Jakovljevs.
Today, the government decided that the state itself could generally purchase bonds of companies under its control. It is significant that the relevant draft law is forwarded to the government not by the Ministry of Finance, which is responsible for the management of monetary affairs and the capital market, but by the Ministry of Transport together with a report on how the refinancing of “airBaltic” bonds is going.
To the question whether this is essentially a new rescue plan for the national airline, which in the foreseeable future, taking into account the need to refinance or repay existing obligations, could, so to speak, simply have problems making ends meet, Transport Minister Kaspars Briškens (P) answers in the negative.
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“I do not agree with this wording. This amendment to the law, if approved by the Saeima, will definitely help Latvia as a country to be an even more active holder of shares and help our capital companies to develop further. In this case, of course, “airBaltic” as one of our companies, which is on the capital market and which has started the refinancing of its previous bonds… It is clear that this would give the state the opportunity to participate in this type of investment alongside and under the same conditions as international investors.” Brisken says.
No decisions have been made yet, but if the state really bought these securities alongside a private investor, it could be considered a kind of security guarantee. It would also refer to the state’s own obligations.
“It is an opportunity to finance solely and exclusively from the increase in borrowing. There is no direct impact on the budget and budget deficit, but it is clear that the government has to borrow money to buy such bonds,” says Finance Minister Arvil Asheraden.
“That’s why they have to earn. If we buy something like that, we must be able to make money,” said Prime Minister Evika Siliņa (JV).
Over the years, state investments in “airBaltic” have exceeded half a billion euros, but the Minister of Transport has already stated that it has paid off for Latvia.
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