AirNZ enters loan facility & cancels 2020 interim dividend

Stock exchange listings: New Zealand (NZX: AIR) / Australia (ASX: AIZ) / ADR (OTC: ANZLY)


MARKET ANNOUNCEMENT

Air New Zealand postal address: Private Bag 92007, Auckland, 1142, New Zealand
Investor Relations email: investor@airnz.co.nz
Investor website: www.airnewzealand.co.nz/investor


20 March 2020

Air New Zealand enters into debt funding agreement for up to $900 million and
cancels 2020 interim dividend


Air New Zealand has entered into a debt funding agreement with the New Zealand Government.
Under the terms of the agreement the Government will provide a standby loan facility (‘the facility”)
of up $900 million to support the airline as it manages the unprecedented impact of the Covid-19
outbreak on its business.

The facility will provide Air New Zealand with the ability to draw down on funds should its cash
reserves drop below a minimum threshold, providing additional funds if cash reserves are not at a
satisfactory level. The facility was negotiated on an arms’ length basis, with each party having been
independently advised. The facility will be provided in two tranches – a tranche of $600,000,000
with an effective interest rate initially expected to be between 7% and 8% per annum and a second
tranche of $300,000,000 with an effective interest rate initially expected to be in the order of 9%
per annum. The facility will be available for a period of 24 months. The effective interest rates on
both tranches will step-up by 1% if the facility remains after 12 months. This debt funding will be
used to support the airline’s business operations as it manages the implications of various
government border restrictions and substantial reductions in travel demand.

The availability of each tranche of the facility is subject to certain conditions precedent, including
agreeing an operating finance plan with the Government and other documentary conditions
precedent. Another condition precedent which Air New Zealand must satisfy in order to have the
facility available is the cancellation of the 2020 interim dividend of 11 cents per share (which
equates to a total of $123 million) that was announced to the market on 27 February 2020 and was
due to be paid to all shareholders, including the Government, on 25 March 2020. Air New
Zealand’s Board of Directors believes that, given the highly uncertain environment that exists, the
cancellation of this dividend is in the best interests of the airline, including because that action is a
pre-requisite to the availability of the facility. Accordingly, the Air New Zealand Board has cancelled
this interim dividend effective today.

Other terms of the agreement (which is in the form of a binding terms sheet to be converted into
long form agreements), include: a prohibition on payment by Air New Zealand of any dividends or
other distributions to shareholders (including the Government) while any amount is available to be
drawn under the facility, the giving of security for the loan by Air New Zealand and certain of its
subsidiaries over their assets (subject to certain exceptions), the Government having the ability to
seek repayment through a capital raise by the airline after six months, or converting the loan to
equity (subject to compliance with laws and any necessary regulatory and/or shareholder
approvals), Air New Zealand giving various undertakings, representations and operational and
informational and other undertakings, and typical events of default. NZX Regulation has granted
Air New Zealand waivers from the requirements under the NZX Listing Rules to obtain shareholder
approval for entry into and performance of the facility with the Government (as a related party of

Stock exchange listings: New Zealand (NZX: AIR) / Australia (ASX: AIZ) / ADR (OTC: ANZLY)


MARKET ANNOUNCEMENT

Air New Zealand postal address: Private Bag 92007, Auckland, 1142, New Zealand
Investor Relations email: investor@airnz.co.nz
Investor website: www.airnewzealand.co.nz/investor


Air New Zealand). Those waivers were granted because of the recent, extraordinary decline in Air
New Zealand’s market capitalisation, and on the grounds that Air New Zealand’s Board of Directors
have confirmed that: entry into the facility is in the best interests of all Air New Zealand
shareholders (other than the Government);
there has been an arms’ length negotiation in relation
to the facility, and that the Government has not influenced Air New Zealand’s decision to enter into
the facility.

Both Air New Zealand and the Government acknowledge that the terms of the facility do not alter
the fundamental principles of their relationship, with the airlines Board of Directors, Greg Foran as
CEO and the Executive Team maintaining responsibility for all commercial and operational
decisions of the airline.

Separately, and distinct from this agreement, the Government is working with Air New Zealand to
ensure other key services can be provided, including repatriation flights, maintaining critical cargo
transport lines and having Air New Zealand staff assist the health response. Those services will
be provided for under separate commercial arrangements to be negotiated in the future on an
arms’ length basis between the airline and the Government.














For investor relations questions, please contact:
Leila Peters, GM of Investor Relations & Financial Planning
leila.peters@airnz.co.nz
+64 21 743 057
Kim Cootes, Investor Relations Manager
kim.cootes@airnz.co.nz
+64 27 297 0244


Ends.