• The offering will be conducted by way of a placement to qualified investors only
• Net Proceeds of the offering are meant to be fully allocated to the repayment of the perpetual bonds held by the French State, issued in April 2021
• 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 optimize financial costs

Air France-KLM S.A. (the “Company”) today announced the launch of an offering of undated deeply subordinated unsecured bonds convertible into new shares and/or exchangeable for existing shares (the “Bonds”), for a nominal amount of approximately EUR 300 million within the limits of a maximum number of 200 million underlying shares by way of a placement to qualified investors only (the “Offering”).

CMA CGM has expressed the intention to participate to the placement pro-rata to its current shareholding of 9.0%.

The net proceeds of the Offering will be fully allocated to the repayment of the perpetual bonds held by the French State, issued in April 2021.

Main terms of the Bonds

The Bonds will be issued at par and will have a nominal value of €100,000 (the “Principal Amount”) and will be convertible and/or exchangeable into new and/or existing shares of Air France-KLM (the “Shares”).

The final terms of the Bonds are expected to be determined today and the settlement date of the Bonds is expected to take place on 23 November 2022.

The reference share price will be equal to the volume-weighted average trading price (VWAP) of Air France-KLM’s shares on the regulated market of Euronext in Paris (“Euronext Paris”) as from the opening of trading on 16 November 2022 until the close of trading on the same day. The conversion/exchange price of the Bonds will be set at a premium of 20% to 25% over the reference share price.

The Bonds will represent direct, unconditional, deeply subordinated and unsecured obligations of the issuers ranking pari passu without any preference among themselves and (1) equally and rateably with any other existing or future deeply subordinated obligations (ii) in priority to present and future equity securities of the issuer and (iii) junior to all present and future Unsubordinated Obligations, Ordinary Subordinated Obligations of the Issuer and prêts participatifs granted to, and titres participatifs issued by, the Issuer (as defined in the Terms and Conditions of the Bonds).

An application will be made for admission of the Bonds to trading on the non-regulated open market of Euronext in Paris (Euronext AccessTM) within one month following the Issue Date.

Interests

From the issue date until 23 November 2025 (exclusive), the Bonds will bear interest at a nominal annual rate comprised between 5.75% and 6.50% payable quarterly in arrear on 23 November, 23 February, 23 May and 23 August of each year (or the next working day if any of those dates are a non-working day) (each, an "Interest Payment Date"), and on the first time on 23 February 2023, subject to any interest payment suspension by the Company (in accordance with the Bonds’ terms and conditions).

From 23 November 2025 (inclusive), the Bonds will bear interest at a rate equal to 1,300 basis points above the applicable 3 year-Mid-Swap Rate in Euro as a reference rate. The reference rate will be subject to a reset every three years thereafter. Interest will be payable quarterly in arrear on each Interest Payment Date and, as the case may be, for the first time on 23 February 2026, subject to any interest payment suspension.

In the event of a change of control, the annual rate for the fixed coupon or the reset reference rate coupon, as the case may be, will be increased by 500 basis points.

On any Interest Payment Date, the Company may decide, subject to certain conditions, to suspend payment of interest in respect of the Bonds for the relevant interest period, subject to having notified Bondholders at least 15 business days prior to the relevant Interest Payment Date. All interest in respect of the Bonds that is not paid at an Optional Interest Payment Date will constitute "Deferred Interest". Any amount of Deferred Interest will bear interest (to the full extent permitted by law) from the interest payment suspension date for any period exceeding 12 months at the interest rate applicable to the Bonds at the relevant period. The amount of accrued interest (the "Additional Interest") in respect of Deferred Interest will become due and payable in the same manner as Deferred Interest. Deferred Interest (as well as the corresponding amount of Additional Interest) may be paid in full or in part at any time at the Company's option, but all Deferred Interest (as well as the corresponding amount of Additional Interest) in respect of all the Bonds will become payable in full in specific cases, including if the Company decides the payment of a dividend or of an interim dividend or repurchase of any equity security or upon redemption of all outstanding Bonds.

Redemption of the Bonds

The Bonds are undated, subject to cases of early redemption at the Company's option and will only be repayable in the event of the liquidation of the Company or upon the expiry of the term indicated in the Company's by-laws (unless extended in accordance with applicable legislation).

The Company may, at its option proceed with early redemption of all, but not some, of the Bonds at par plus accrued interest, Deferred Interest and, as the case may be, Additional Interest (the “Early Redemption Price”) in accordance with the provisions of Dividend and Capital Stopper:

• for the first time on 23 November 2025, and then on each Interest Payment Date;
• in case of a change of control;
• from 14 December 2024 until 23 November 2025 (excluded), if the arithmetic average, calculated over any period of 10 trading days falling within any period of 20 consecutive trading days preceding the publication of the early redemption notice of the daily products of the Company’s closing trading share price on Euronext Paris and the conversion/exchange ratio in effect on each trading day during such period exceeds 130% of the principal amount of the Bonds;
• and if the total number of the Bonds outstanding is less than 15% of the number of Bonds originally issued

Conversion/Exchange rights

Bondholders may exercise their conversion/exchange right at any time 40 days after the issue date (inclusive) until the 10^th business day (exclusive) preceding the earlier of the two following dates: 23 November 2025, or, as the case may be, the date set for any early redemption.

The conversion/exchange ratio is set at the Principal Amount divided by the prevailing initial conversion/exchange price, subject to subsequent adjustments (as set out in the terms and conditions of the Bonds).

Dilution

For illustrative purpose, when considering an offering of Bonds for a maximum amount of approximately €300 million, a nominal value of €100,000 per Bond and a conversion/exchange price calculated on the basis of a reference share price corresponding to a €1.4035 closing share price on 15 November 2022, and a 22.5% conversion premium corresponding to the issue premium mid-range, dilution would represent approximately 6.8% of the outstanding share capital, if the Company decided to exclusively deliver new shares upon conversion.

Placement and offer

The offering will be conducted in accordance with Article L.411-2, 1° of the French Monetary and Financial Code (Code monétaire et financier), as per the authorization granted by the Company’s extraordinary general meeting held on May 26^th, 2021 (23^rd resolution) as amended by the Company’s extraordinary general meeting held on May 24^th, 2022 (19^th resolution), through an offer to qualified investors only, as defined in article 2 point (e) of Regulation (EU) n° 2017/1129, in France and outside France (excluding the United States of America, Canada, Australia and Japan). There will be no prospectus, offering circular or any similar offering document produced in connection with the offering.

Deutsche Bank Aktiengesellschaft, HSBC Continental Europe and Natixis are acting as structuring banks and as joint global coordinators of the Offering (the “Structuring Banks” and the “Joint Global Coordinators”). Crédit Agricole Corporate and Investment Bank is acting as co-global coordinator (the “Co-Global Coordinator”), and together with the Joint Global Coordinators and with Société Générale as joint bookrunners (the “Joint Bookrunners”).

Lock-Up

In the context of the offering, the Company will agree to a lock-up undertaking ending 90 calendar days following the issue date of the Bonds (inclusive), subject to certain exceptions or waiver of the Joint Global Coordinators and Joint Bookrunners.

Subscription intention from existing shareholders

CMA CGM who holds 9.0% of Air France-KLM as of the date of this press release, has expressed the intention to participate to the placement pro-rata to its current shareholding.

The Company is not aware of any subscription intention from its other main shareholders.

Public information

The offering of the Bonds is not subject to a prospectus approved by the French Financial Market Authority (Autorité des marchés financiers) (the “AMF”). This press release does not constitute or form part of any offer or solicitation to purchase or subscribe for or to sell securities.

Detailed information on Air France-KLM, including its business, results, prospects and related risk factors are described in the Company’s universal registration document filed with the AMF on April 4^th, 2022 under number D.22-0236 (the “URD”) as supplemented by an amendment to the URD filed with the AMF on May 23^rd, 2022, which are available together with all the press releases of the Company, the half-year financial report of the Company for the six-month period ended 30 June 2022, and the press release for the three-month period ended 30 September 2022, on the Company’s website (www.airfranceklm.com).