Air Baltic offering 14.89% annual return over 4 years, is that unsecured, risk of losing your money?
- Thread starter jaykay
- Start date
Small country airline that could go the way of many other small country airlines and you never see your money. Yield is appropriate for risk. Can't really compare to government bonds. If they are offering this yield its because they can't finance cheaper elsewhere!
This is a State-owned airline.
I'm surprised the annual coupon is so high.
I accept that aviation is competitive, and not risk-free, but 14.5% coupon is very high.
Is this a normal corporate bond?
company.airbaltic.com
www.boerse-frankfurt.de
I'm surprised the annual coupon is so high.
I accept that aviation is competitive, and not risk-free, but 14.5% coupon is very high.
Is this a normal corporate bond?
Newsroom - Company | airBaltic
Welcome to the airBaltic Newsroom. Check out our press releases to get the latest news about airBaltic.
company.airbaltic.com
Air Baltic Corporation A.S. 14,5% 24/29 Bond | A3LYHS | XS2800678224 | Price
Air Baltic Corporation A.S. 14,5% 24/29 price in real-time (A3LYHS / XS2800678224) charts and analyses, news, key data, turnovers, company data.
State-owned airlines have gone bankrupt before.
Relevantly, right next door to Latvia, Air Estonia, 100% owned by the Estonian government, collapsed in 2015. Bondholders and institutional creditors lost the bulk of their investments. The Estonian government established a new airline, Nordica, which took over the obligations of Air Estonia in relation to unpaid wages and redundancy entitlements, but other creditors were left high and dry.
Something similar happened when the Hungarian state-owned Malev collapsed in 2012; bondholders were left unpaid.
So, yeah; Air Baltic aren't offering 14.5% out of sense of boundless generosity; they're offering this becuse the market demands that kind of return to lend to them. It's a genuine risk premium.
Air Baltic's bonds are currently rated B- by Fitch ("High credit risk; financial commitments currently met but capacity uncertain"), with a negative outlook ("More likely to fall further than to rise"). This is considered a "junk" rating, as opposed to an "investment grade" rating. Other debt issuers with a B- rating from Fitch include Odea Bank, in Turkiye, and the sovereign debt issued by Ghana. I haven't checked other credit rating agencies, but I expect they'll not have very different ratings for Air Baltic.
So this is speculative stuff; a modest holding of securities of this kind might have a place in the diversified portfolio of a sophisticated investor that has an appetite for risk and knows that they're doing. But if you're looking for a safe haven for your little stash, this is not it.
Relevantly, right next door to Latvia, Air Estonia, 100% owned by the Estonian government, collapsed in 2015. Bondholders and institutional creditors lost the bulk of their investments. The Estonian government established a new airline, Nordica, which took over the obligations of Air Estonia in relation to unpaid wages and redundancy entitlements, but other creditors were left high and dry.
Something similar happened when the Hungarian state-owned Malev collapsed in 2012; bondholders were left unpaid.
So, yeah; Air Baltic aren't offering 14.5% out of sense of boundless generosity; they're offering this becuse the market demands that kind of return to lend to them. It's a genuine risk premium.
Air Baltic's bonds are currently rated B- by Fitch ("High credit risk; financial commitments currently met but capacity uncertain"), with a negative outlook ("More likely to fall further than to rise"). This is considered a "junk" rating, as opposed to an "investment grade" rating. Other debt issuers with a B- rating from Fitch include Odea Bank, in Turkiye, and the sovereign debt issued by Ghana. I haven't checked other credit rating agencies, but I expect they'll not have very different ratings for Air Baltic.
So this is speculative stuff; a modest holding of securities of this kind might have a place in the diversified portfolio of a sophisticated investor that has an appetite for risk and knows that they're doing. But if you're looking for a safe haven for your little stash, this is not it.
Last edited:
Fibbernacci
Registered User
- Messages
- 123
Mr Putin could have an impact on your investment at some point too.