According to the request of the Minister of Transport Kaspars Briškens (P), the Saeima agreed that the Minister of Finance will purchase bonds of “airBaltic” in the amount of no more than 100 million euros or equivalent.
It is determined that in this case the amount of state investment against “airBaltic” will not exceed 136 million euros or an equivalent amount. LETA announced that from the mentioned amount, the debt of the “airBaltic” company to the State Treasury in the amount of 36 million euros would be converted into new bonds.
The Minister of Finance will purchase the bonds in accordance with the recently adopted amendments to the “Law on Budget and Financial Management” and the positive decision already adopted by the government.
The state will participate in the implementation of the investments specified in this decision on the same terms and to the same extent as private investors.
As reported, the government decided on Tuesday to participate in the purchase of “airBaltic” bonds worth up to 136 million euros, the Minister of Transport said at the press conference after the government meeting. Bond investments of this type will be in accordance with market rules and the conditions of European Union (EU) state aid.
The purchase of the company’s bonds will bring economic benefits to the state in the long term, as the state and private investors will receive quarterly interest payments. It is tentatively expected that “airBaltic” will open bond purchase offers next week.
Briškens explained that the government decided to participate in the issue of bonds worth up to 136 million euros, because “the economic contribution from the interest payments, which the state would receive in the same amount as private investors, as well as it would significantly promote the development of the Latvian capital market, is clearly visible.”
“The state would be involved not only as an investor in the financial sector, but also in strategically important state-owned enterprises,” Brishken said.
Last week, the Saeima adopted the government-directed amendments to the “Law on the Budget and Financial Management”, with which the Minister of Finance is given the authority to use state budget funds with the support of the Saeima and the government for the purchase of fixed income securities of capital companies in which the state has a decisive influence.
The Ministry of Transport stated that the purchase of “airBaltic” bonds would have no impact on the budget deficit.
Bryshken noted at the press conference that “the state does not invest to stimulate other investors, but the state is considering investing on symmetrical terms with private investors, while receiving income from profits.”
It has already been reported that the Saeima recently adopted the government-directed amendments to the “Law on Budget and Financial Management”, with which the Minister of Finance is given the authority to use state budget funds with the support of the Saeima and the government for the purchase of fixed income securities of capital companies in which the state has a decisive influence.
Transport Minister Briškens has noted that the adopted changes will enable the state to participate in the bond issue of the Latvian national airline “airBaltic” alongside and under the same conditions as international private investors.
On the other hand, Finance Minister Arvils Asheradens (JV) has emphasized that such purchase of bonds of state capital companies, which the state could make on the same terms as private investors, does not create pressure on the state budget deficit. At the same time, Asheraden pointed out that the purchase of such bonds can only be financed by borrowing, so this would increase the amount of borrowed money.
It has already been reported that in July 2024 the maturity date of the 200 million euro bonds of the Latvian national airline “airBaltic” will expire, so the airline is looking for external financing to refinance the bonds, and the company also plans to attract additional financing in the amount of about 100 million euros.
“The airline plans not only to refinance 200 million euros, but also to attract an additional 100 million euros in order to improve the cash balance and facilitate the financing of further capital investments related to increasing the company’s capacity,” the airline’s 2023 annual report explains.
The audited turnover of “airBaltic” last year was 664.289 million euros, which is 33.2% more than in 2022, and the company also made a profit of 33.852 million euros, in contrast to losses a year earlier.
The Latvian state owns 97.97% of “airBaltic” shares, while “Aircraft Leasing 1” owned by financial investor, Danish businessman Lars Tūsen – 2.03%.
