Air Baltic weighed funding options before choosing Chapter 11

Air Baltic weighed several ways to raise money at short notice before choosing Chapter 11 protection in the United States, according to the filing. The Latvian carrier filed its petition on 14 September, a move that also covers its training arm and cargo operation.

With the consultancy Seabury, the airline drew up a long-term plan built on a tighter route network based around Riga, a smaller fleet and a rebuilt balance sheet. Carrying out that plan, the filing states, and keeping enough cash through the restructuring, requires a significant amount of further funding.

The board made speed and certainty of delivery its main test, the filing says, given the airline's immediate need for liquidity and the risk that doing nothing would have forced an insolvency filing and destroyed considerable value.

A proposal from an ad hoc group of bondholders initially looked like the most workable route. The board also considered a Chapter 11 filing tied to debtor-in-possession financing and a restructuring under the company legislation of England and Wales. It concluded that debtor-in-possession funding would deliver a better and more dependable result than the interim bond financing it had been weighing. Securing that funding meant entering Chapter 11.

The company says the proceedings best preserve Air Baltic's value and look after the interests of the airline, its creditors, shareholders, employees and other parties. Pratt & Whitney, the engine manufacturer, is listed in the filing as the largest external unsecured creditor.

Latvia's cabinet of ministers has also been involved; the source does not set out further detail on that.