Argentina, April 27, 2020 – Argentina’s aviation agency Administración Nacional de Aviación Civil (Argentina) or ANAC, announced that all commercial air traffic, international and local, will remain restricted until 1 September. The restriction is credit negative for Aeropuertos Argentina 2000 S.A. (AA2000, Caa3 negative) because it will receive no passenger revenue until September and the prolonged restriction comes in the middle of an exchange offer process that AA2000 initiated on 21 April to extend its 2020 debt amortization payments until May 2021.
ANAC’s resolution does not mean that there will be no flights through September, but instead flights will be pre-approved by ANAC on a case-by-case basis. We expect flights through September to be very limited.
AA2000 is working on several cost-saving measures to preserve its cash position, including lowering capital expenditures to a minimum and suspending all pending construction works, among others, in addition to the additional liquidity relief the company is seeking to obtain through its debt exchange offer.
Air traffic in Argentina continued operating normally until mid-March when the transportation ministry suspended all commercial air traffic, in line with government-mandated national movement restrictions in response to coronavirus. Pre-coronavirus AA2000 traffic trends were solid. Total traffic growth in 2019 was at 9% over the previous year, but the company now expects traffic to drop as much as 48% for 2020 (see Exhibit 1).
AA2000 offered to exchange its outstanding $350 million 6.875% senior secured notes due in 2027 for newly issued 6.875% cash/9.375% payment-in-kind (PIK) Class I Series 2020 additional senior secured notes due in 2027.
Terms of the Series 2020 additional notes will be largely identical to the existing notes, but the quarterly interest payment originally scheduled to be paid in cash on 1 May 2020 will be paid in cash in the form of an interest premium or by a PIK by increasing the principal amount of the additional notes to be issued on the settlement date. Furthermore, quarterly interest payments originally scheduled to be paid in cash on the existing notes on 1 August and 1 November 2020 and 1 February 2021 will be by PIK at a rate of 9.375% per year (see Exhibits 2 and 3). Quarterly amortization payments originally scheduled for 1 May 2020 through 1 February 2021 will be deferred to begin 1 May 2021 and continue under a new principal amortization schedule until maturity. The Series 2020 additional notes and the existing notes will be secured by the same collateral on a pro rata and pari passu basis in accordance with the Indenture and the related collateral documents.
It is a condition of the exchange offer, among others, that at least 80% of the existing notes’ outstanding principal amount is validly tendered for exchange and not withdrawn. The company does not expect to modify the offer terms despite the traffic suspension.
AA2000 was incorporated in 1998 after winning the national and international bid for the concession rights for 35 airports that handle more than 90% of Argentina’s arriving and departing passengers and include the three airports that serve the capital city of Buenos Aires – Ezeiza (EZE), Aeroparque (AEP) and Palomar (EPA) Airports.
Credit Outlook: 4 May 2020. Pg. 8
Moodys
Atlantic Investors Service 