Air Seychelles faces petition from Etihad over unpaid debts

Air Seychelles is facing a petition by Etihad after failing to pay its debt to the carrier. Etihad Airways Partners is now requesting that Air Seychelles be wound down so that it can be paid back for its 40% stake in the carrier. The petition has led to the President of Seychelles calling a meeting to deal with the debts. Let’s find out more.

According to the Seychelles News Agency, Etihad is turning up the heat on Air Seychelles over unpaid debts. The Abu Dhabi-based firm filed a court petition against the flag carrier on August 19th, demanding that the airline be wound down to pay its debts to Etihad. Air Seychelles will appear in court on September 6th to further argue the petition.

The escalation comes three months after Etihad announced that it will divest its stake in the African island airline. The carrier took a huge cut on its 40% stake, receiving only $11.34 million out of the $72.3 million owed. However, exacting even this favorable debt repayment has been challenging, according to lawyers for EA Partners bondholders (the vehicle for Etihad’s investments).

Now, the bondholders are requesting the carrier be wound down to pay off its massive debts. In a statement, the Noteholders Committee for the bond owners said, “To date, there has been no substantive engagement, nor any sense of urgency concerning the airline’s situation, from either Air Seychelles or its sole shareholder, the government of Seychelles.”

This has led to the case going before the Supreme Court, which will now decide the fate of the carrier and restructuring.

Given the devolving situation, Seychelles’ President Wavel Ramkalawan and other ministers will meet Air Seychelles’ board to discuss the situation. After taking full control of the airline for just $1, the government is trying to ensure that the airline remains afloat and continues to contribute to the tourism-dependent economy.

Previously, the airline and bond owners had announced that payments would not start until 2022. However, Etihad seems to be nervous that this will not happen either, leading to the petition for liquidation.

In addition to Etihad’s $11.3mn due, the airline also owes other bondholders $71.5 million, of which it will not pay more than $20mn. Now, the question remains of how soon Air Seychelles and the government will be able to repay the dues. However, without sticking to a schedule, the carrier could be in danger of being cut off from important resources.

As global tourism begins a recovery, Seychelles is eager to cash in on demand. Having a fully functioning airline is critical to this strategy and hence, saving Air Seychelles is a priority. For now, the government will be fighting to keep the airline open and negotiating with bondholders to pay back dues.

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