US court accepts airBaltic Chapter 11 filing, Latvian prime minister says

US Court Approves airBaltic Chapter 11 Filing Amid Debt Restructuring Plans

airBaltic's Chapter 11 Bankruptcy and Debt Restructuring

By Gianluca Lo Nostro

Sept 16 (Reuters) - A U.S. bankruptcy judge has approved Latvian carrier airBaltic's request to enter Chapter 11 bankruptcy proceedings and begin restructuring its debt, Prime Minister Andris Kulbergs said on Wednesday.

Immediate Effects of the Court Approval

"This means that airBaltic will be able to: immediately access financing; begin the restructuring process; review obligations to creditors. Work continues," Kulbergs said in a post on social media platform X.

The airline did not immediately reply to a request for comment. AirBaltic, majority-owned by the Latvian government, voluntarily filed for protection under Chapter 11 on Monday as it seeks to cut its debt pile after the Iran war increased financial pressure.

Securing New Financing

The company said at the time it had secured a commitment for €350 million ($404 million) in financing from certain lenders.

Next Steps in airBaltic's Restructuring Process

In the coming months, airBaltic is expected to negotiate with bondholders, aircraft lessors and other creditors as it works toward a formal reorganisation plan, which will require separate court approval before the company can exit Chapter 11.

Timeline for Completion

The airline has said it aims to complete the process by around June 2027, with a reduced fleet and lower operating costs as part of its longer-term business plan.

Bondholders' Objections and Legal Challenges

Bondholders Object to Financing Deal

BONDHOLDERS OBJECT TO FINANCING DEAL 

However, a group of holders of airBaltic's 14.5% secured bonds due in 2029 filed a limited objection on Tuesday, seeking to delay the approval of the financing package.

Details of the Objection

The group, which includes Israeli investment firm Klirmark Capital, had negotiated a proposal with airBaltic before the company filed for Chapter 11.

The bondholders have asked the court to delay parts of the financing and preserve their rights to challenge the terms at later hearings, according to the court filing.

Choice of US Bankruptcy Proceedings

The airline had planned to seek approval for an interim financing package under UK restructuring law, but opted for a U.S. filing instead, supported by the Latvian government.

The U.S. process has been widely used by airlines because it allows carriers to continue operating while reducing debt, and offers a framework for complex cross-border restructuring involving international creditors.

Fleet Adjustments and Future Plans

Aircraft Fleet Reductions

Under the Chapter 11 process, airBaltic is also seeking to return 20 surplus aircraft to lessors and reduce rents on other aircraft in its fleet.

Impact of Global Events on airBaltic's Strategy

The carrier had previously aimed to have an expanded fleet of 100 jets and pursue a stock market listing, but the wars in Ukraine and the Middle East undermined those plans.

Additional Information

($1 = 0.8663 euros)

(Reporting by Gianluca Lo Nostro; Editing by Stine Jacobsen, Terje Solsvik and Milla Nissi-Prussak)