A state-owned flag carrier is being financed through bankruptcy at SOFR plus 800 basis points by institutional credit funds.
airBaltic filed for Chapter 11 protection on . The carrier is 89% owned by the Latvian government, with Lufthansa holding a 10% minority stake.
The debtor-in-possession financing is what makes this notable for credit investors rather than only for aviation. A €350 million DIP facility is being provided by a syndicate that includes Oaktree Capital Management, Strategic Value Partners, Hayfin Capital Management, Barclays and Morgan Stanley, priced at SOFR plus 800 basis points.
Read the lender list
A sovereign-majority-owned national airline in financial distress has, historically, a short list of places to go. The state shareholder recapitalizes. Relationship banks extend. A supranational lender steps in. What happens here instead is that the money comes from a syndicate anchored by distressed and alternative credit managers, with two investment banks alongside them.
That is a meaningful marker of how far institutional private credit has moved into debtor-in-possession lending, which was for a long time the province of a narrower group of specialist lenders and existing secured creditors. DIP loans sit at the top of the capital structure with super-priority status and typically carry tight controls over the case, which makes them among the most attractive risk-adjusted assets a credit fund can hold. SOFR plus 800 reflects both the airline's position and the pricing power of a lender group that the borrower has limited ability to replace.
What this is not
Because airBaltic is state-owned rather than sponsor-owned, this is not a private equity bankruptcy and should not be read as one. The private markets angle here is entirely on the lending side. There is no sponsor taking a loss, and the equity question runs through the Latvian government rather than through a fund.
What to watch
The terms of the plan as they are disclosed through the case, particularly the milestones the DIP lenders impose. Whether the Latvian state participates in restructured equity or is diluted. And whether Lufthansa's 10% position survives in any form, which will say something about how strategic minority stakes in European carriers get treated when the capital structure is reset.