Carlyle leads restructuring of Trans Maldivian Airways

TMA was a lucrative investment for The Blackstone Group, which held the company for four years, selling out to Bain in 2017. The incoming PE firm was accompanied by two Chinese partners: tourism and travel management business Shenzhen Tempus Global Business Services; and a fund run as a joint venture between RJ Capital Group and a Tempus Global subsidiary.

TMA is the world’s largest seaplane operator with a fleet of 56 aircraft that transport tourists from the central Male International Airport to nearby islands. The Maldives comprises about 1,190 islands and has a population of 400,000. It received 1.7 million tourists in 2019. Asian arrivals totaled 705,140, with China alone accounting for 284,029.

Between 2014 and 2018, TMA’s annual passenger volume rose 67% to more than 410,000, Ministry of Tourism statistics show. Between April and June of 2020, the fleet was grounded as the Maldives closed its borders. Tourist traffic has been relatively weak since re-opening with 555,494 arrivals in 2020. Russia has become the largest post-COVID-19 market, accounting for nearly one-quarter of visitors.

Bain agreed on a standstill with creditors after missing an interest payment in May 2020, but this expired at the end of August with no restructuring plan in place, reported Debtwire, AVCJ’s sister title. The same month, some banks started selling their positions in the $276 million senior loan due in December 2022.

Creditors rejected Bain’s restructuring plan, whereby the principal would have termed out over a period of seven years to 2027 at half the original interest rate. The private equity firm also offered to inject around $50 million in new equity. Overall, lenders would be taking a 35-40% haircut on their claims, well below the levels needed to break even, Debtwire reported.

A source close to the situation told AVCJ last December that Bain had essentially been squeezed out. The source referred to it as a “debt-for-debt” transaction with the new owners leveraging up the airline again and waiting for tourism demand to rebound. Another source said that the restructuring reduces leverage on the business.

Funds affiliated with Carlyle have now become TMA’s majority owner. King Street Capital Management and Davidson Kempner Capital Management have minority interests. They said in a statement that the transaction – approved by TMA’s former equity owners – is intended to help TMA return to solid financial footing and pave the way for future expansion.

“TMA is an operationally strong business with an experienced management team and clear competitive advantages. We are pleased to provide the strategic capital and expertise the company needs to return to growth,” said Christian Schmitz, a managing director in Carlyle’s global credit business.

“As vaccines continue to be rolled out globally, we expect travel to return to pre-pandemic levels in the Maldives, which remains one of most attractive vacation destinations in the world.”

Tourism and related services directly contribute to 40% of the country’s economy, 80% of exports, and half of total revenues. The World Bank estimates the economy contracted by 28% in 2020. However, a slow but steady rebound is expected, with real GDP expanding by 17% in 2021 and 11.5% in 2022, assuming tourist numbers hit one million and 1.4 million in those two years.

Arrivals surpassed 100,000 in March but dropped thereafter following a new wave of COVID-19 infections. The government anticipates an upturn in July as it ramps up local vaccinations, eases distancing restrictions, and reopens its borders to South Asian countries.

Clifford Chance served as legal advisor to the senior lenders in the TMA restructuring, and to FTI Consulting, which acted as receiver to TMA’s holding company.

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• Topics
• South Asia
• Write-off
• Credit
• Restructuring
• Support services
• Consumer
• Travel
• Transportation
• Bain Capital Asia
• The Carlyle Group