The shares of Air France-KLM have sunk as low as 12 per cent after the carrier issued €300m (£262.5m) worth of bonds convertible into shares.
Air France-KLM said the move would help it strengthen its capital and pay back the financial aid it received from the French government to stay afloat during the pandemic.
Funding – which was provided also by the Dutch government – amounted to a total of €10.4bn.
“This transaction marks a further step in the group’s initiatives to accelerate the repayment of the French state aid, continue to support the strengthening of equity capital, and help optimise financial costs,” Air France said in a statement published today.
The airline added that shipping giant CMA CGM – which owns a 9 per cent stake in the company – would participate in the pro-rata placement to its current shareholding.
No other shareholders – including the French and Dutch governments – have expressed an interest in the bond issuance.
Commenting on the news, Hagreaves Lansdown’s equity analyst Sophie Lund-Yates told City A.M. it was the method not the fundraising itself that caused trouble.
“The market has had a significant reaction to this development because the issue will be dilutive to shareholders unless they decide to buy into it,” she told City A.M.
“By and large, the group’s ambitions to raise capital aren’t new and to that extent the news shouldn’t be seen as a surprise, it’s the method of the fundraising that’s caused disappointment.”
The bond issuance is part of Air France’s decision to repay €4bn worth of pandemic aid.
The move sent shares down by almost 8 per cent when it was announced in February.