A debt restructuring request emanating from Air Seychelles (HM, Mahé) has been rejected by bondholders of Etihad Aviation Group's Netherlands-based special purpose vehicle Etihad Aviation Partners II, after the carrier defaulted on a payment due on August 24, Bloomberg Law reported.

The bondholder group rejected an offer from Air Seychelles to partially repay its loan to EA Partners II, consisting of an aggregate prepayment of USD15 million and a principal extension of USD5 million backed by a government guarantee.

As previously reported, Air Seychelles is one of several companies linked to Etihad Airways (EY, Abu Dhabi International) that received funding via a USD500 million EA Partners II bond due in 2021.

EA Partners II, one of two Dutch special purpose vehicles belonging to Etihad Airways, revealed on July 10 that the Seychellois airline had sent it a letter dated July 3 “stating its intention to engage in discussions” on its obligations to its debts relating to an agreement signed in May 2016.

The debt obligation agreement was the second of two that Etihad Aviation Group signed with a variety of airlines it owned stakes in. Under the May 2016 deal, Air Seychelles, Air Berlin (1991), Air Serbia, Alitalia, and Jet Airways signed up for a USD500 million platform financing transaction via EA Partners II, with 6.75% notes due in 2021.

In November 2019, the Seychelles government said it was seeking to secure a bank guarantee for preferential shares due to the debt Air Seychelles had accumulated over the years, a guarantee that would allow it to pay off its debt of more than USD30 million to Etihad Airways.