Wow Air Secures 60M EUR In Bond Financing

Wow Air this past week secured 60 million euros in bond financing it desperately deeded (at 9% coupon) while planning to launch an IPO in the next two years.

Wow Air Iceland

Seems that one fourth of the bond proceedings must be used to settle the unpaid fees to the Keflavik airport operator (Wow Air hasn’t paid anything to Isavia in 2018).

Here’s an excerpt from Travel Weekly (access their piece here):

However, Icelandic newspaper Morgunbladet reported Wow owes two billion Icelandic krona (€16 million) to airport operator Isavia in unpaid charges at Keflavik.

It reported Wow has not paid the charges at all this year, with Isavia’s half-year accounts listing the debt.

Wow Air reported a $27.5 million (€31 million) loss in 2017 and expects to lose money again in the current financial year, although Mogensen forecasts a
profit in 2019.

Wow Air pays very high price for the cash according to Bloomberg (access their article here):

The Iceland-based low-cost carrier hired Arion Bank and Arctica Finance to prepare for an initial public offering in 12 to 18 months, it said late on Tuesday, when it also published details about a bond issue. The 60 million euros ($70 million) bond, maturing in three years, will pay a 9 percent coupon. That’s the highest interest of any bond by a European airline denominated in euros or U.S. dollars that’s still actively trading, data compiled by Bloomberg show.

Here’s presentation draft that Wow Air has presented to investors:

Download (PDF, 3.04MB)

Conclusion

Surprised that any airport would allow an airline to operate if they don’t pay any fees for more than six months like what Wow Air did in Keflavik. It is unfair to competitors that take care of their responsibilities and would have left isavia with unpaid debt if airline had collapsed.

Let’s see if the airline is able to turn its fortunes around. The investor presentation believes (as they always do) that the airline will mint money in 2019 after two bad years of 2017 and 2018.

The fuel hedging is not the solution that is referenced here like what recently happened with Cathay Pacific. They lost billions when they hedged at the wrong time with high prices.

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