Air Baltic Corporation AS - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Air Baltic Corporation AS, a Latvian stock company operating from its Riga hub, as Borrower, together with each entity, which may be a subsidiary or an orphan owner trust, that takes any of the Aircraft Collateral once proceeds of the initial draw have been applied
• Air Baltic Training, SIA and Baltijas Kravu Centrs SIA, as Guarantors, along with each other debtor subsidiary of Air Baltic Corporation AS

Agent / Lender(s)

• Strategic Value Partners, LLC, which sourced and syndicated the facility, as DIP Arranger
• Investment funds and accounts managed by SVP, together with Barclays, Hayfin and Oaktree entities, as DIP Lenders; commitments are allocated 60% to SVP entities, with an additional 2.86% to further SVP-affiliated entities, 14.29% to Barclays Bank Ireland PLC, 11.43% to Hayfin entities and 11.43% to Oaktree entities
• Barclays Bank Ireland PLC or an affiliate, as Fronting Lender, which funds the loans at closing and subsequently assigns them to the committed lenders at par plus accrued interest
• GLAS USA LLC as administrative agent and GLAS Americas LLC as collateral agent

DIP Commitments

• €350 million senior secured, superpriority, priming term loan facility — all new money, with no roll-up of prepetition debt — comprised of three tranches:
  • Tranche 1: €175 million, drawn in two sub-tranches
    • €140 million available on an interim basis, or such lesser amount as the Court authorizes
    • The remaining €35 million available upon entry of the final order
  • Tranche 2: €125 million, available only upon entry of the final order and the separate Priming Order, and reduced dollar-for-dollar by any financing provided by a non-DIP Lender on terms satisfactory to the Majority DIP Lenders
  • Tranche 3: €50 million, subject to the same dollar-for-dollar reduction mechanic and to the Tranche 3 milestones
• Amounts repaid or prepaid may not be reborrowed. The facility does not amortize; principal is due in a bullet at maturity.

Interest Rate

• Term SOFR + 8.00% per annum, payable monthly, with the debtors holding the option to pay in kind by capitalizing interest into principal; the Rule 4001 summary chart describes the base rate as 12-month SOFR, while the term sheet states Term SOFR with a one-month interest period
• Default Rate Increase: 3.00%

Fees

• Each of the principal fees is calculated on the full €350 million commitment rather than on drawn amounts, and the two fees payable in kind are capitalized into the principal balance rather than paid in cash:
  • Backstop Commitment Fee: 5.00%, fully earned on the interim closing date, capitalized into principal on the Tranche 1 funding date with interest accruing on the full amount from that date
  • Upfront DIP Fee: 5.00%, earned on execution of the commitment letter, capitalized into principal with interest accruing on the full amount from the Tranche 1 funding date
  • Exit Fee: 5.00%, payable in cash upon any redemption, repayment, acceleration or prepayment upon exit
  • Make-Whole Amount: subject to entry of the final order, upon any redemption, prepayment, acceleration or repayment prior to exit, the fees and interest that would have been payable through the originally scheduled maturity date, calculated on the full €350 million of original commitments and assuming the full amounts were drawn on the milestone schedule, whether or not actually drawn
  • Maturity extension fee: 0.75% of then-unfunded commitments and outstanding loans
  • Agent Fee: set in a separate agency fee letter between the DIP Agent and the borrower, dated on or about the interim closing date
• The interim order deems the fees fully earned, non-refundable and non-avoidable, payable without further application to the Court, and not subject to recharacterization as unmatured interest, penalty or unenforceable liquidated damages.
• Lender expense reimbursement covers the agent, arranger, fronting lender and lenders, including an aviation asset servicer and technical advisor, with counsel limited to Seward & Kissel, Vedder Price, Dentons and one local counsel per jurisdiction; individual lender legal fees incurred before entry of the interim order are capped at $100,000, a cap that lifts during a continuing event of default.
• Under the interim order those fees are paid monthly on summary invoices without further Court order, are not subject to allowance or review by the Court or to the U.S. Trustee fee guidelines, and are payable whether incurred before or after the petition date; the debtors, the U.S. Trustee and any committee's lead counsel have 10 calendar days from receipt to object in writing, after which undisputed amounts are paid within five business days and the Court resolves any disputed portion.

Maturity

• The earliest to occur of:
  • The earlier of nine months after the petition date and 250 days after funding of the initial Tranche 1 loans
  • Substantial consummation of a confirmed Chapter 11 plan
  • Conversion of any of the cases to Chapter 7
  • Acceleration of the loans following an event of default
• The debtors may extend the initial maturity by three months on two business days' notice by paying 0.75% of the then-unfunded commitments and outstanding loans.
• Optional prepayment is permitted without premium or penalty other than the exit fee and make-whole amount. Mandatory prepayment is triggered by a section 363 sale of all or substantially all assets, and by 100% of net cash proceeds from other dispositions or total losses of DIP collateral (other than junior lien collateral), extraordinary receipts, and unpermitted debt incurrence, subject to reinvestment rights of 30 days for asset sale proceeds and 20 days for insurance proceeds that do not apply to aircraft collateral or a simulator.

Use of Proceeds

• Repay approximately €71,665,825 of existing Export Development Canada and Axiom debt, plus accrued interest, fees and make-whole amounts and the EDC simulator debt, so that the debtors can exercise the purchase options under their finance leases and take title to 15 finance-leased aircraft and engines plus a simulator; the debtors state this unlocks approximately €170 million of unencumbered value
• Fund postpetition working capital and general corporate needs
• Pay current interest and fees under the facility
• Pay professional fees and allowed administrative costs of the cases, in accordance with the approved budget and the DIP orders
• Adequate protection payments
• Prohibited uses: no proceeds may fund the investigation or prosecution of claims against the DIP Lenders, DIP Agent or DIP Arranger or their affiliates, and no loans, advances, dividends or investments may be made to non-debtor entities

Securities and Priorities

• Subject to the Carve-Out, the DIP obligations are granted superpriority administrative expense claims under section 364(c)(1), senior to all other administrative claims including the adequate protection claims of the prepetition bondholders, with the following lien package:
  • First-priority perfected liens under section 364(c)(2) on all property unencumbered as of the petition date, including, upon entry of the final order, avoidance action proceeds and the right to bring and control such actions following an event of default
  • Junior perfected liens under section 364(c)(3) on the assets listed on Schedule 2 to the term sheet — the Baltic Cargo hangar at Riga Airport and other assets securing the BluOr Bank facility
  • Priming first-priority liens under section 364(d)(1) on all remaining property, which do not attach to the prepetition bond collateral until the Court enters a separate Priming Order or the bondholders approve priming by extraordinary resolution; that limitation does not apply to the Aircraft Collateral
• Most significantly, the debtors are not seeking priming relief at the interim stage. Collateral for the initial Tranche 1 draw is limited to the eight Airbus A220-300 aircraft, seven PW1521G spare engines and all other aircraft collateral; the Schedule 2 assets; unencumbered property; and proceeds of the foregoing, including collateral assignments of insurance. Upon entry of the final order, the collateral expands to all assets of the debtors, including avoidance action proceeds and the assets securing the prepetition bonds.
• The property the priming liens would reach is itemized on Schedule 3(b) to the term sheet: the airBaltic trademarks, brand rights and other intellectual property, which the debtors describe as the most valuable piece of the collateral package securing the prepetition bonds; the A220-300 rotable and expendable spare parts pool; the A220 full flight simulator; hangars, buildings and other real property, including the MRO Konkors facility, the training center, the BA hangar and the pilot academy; trade and other receivables; inventory, uniforms and consumables; the bond service reserve account balance and other existing 2029 bond collateral; and all other cash, real estate and property not already covered by the 364(c)(2) liens.
• The DIP liens attach and perfect automatically upon entry of the interim order without any further filing or recordation, and are not subject to challenge under sections 510, 546, 549 or 550 or subordinate to avoided liens preserved under section 551, postpetition liens, or intercompany or affiliate liens.
• No superpriority claim equal or senior to the DIP superpriority claims may be granted or allowed in the cases, and the debtors may not seek any other postpetition financing, except as the term sheet expressly permits, on repayment of the DIP obligations in full in cash, or with the Majority DIP Lenders' prior written consent.
• No liens may be granted over property where the Cape Town Convention and Protocol prohibit them, though the liens reach any sale or other proceeds. Other leasehold interests in equipment and equipment subject to third-party financing arrangements are excluded from the collateral where the underlying agreement conditions a lien on a consent that has not been obtained and Cape Town bars the grant. Credit card processor holdbacks under the debtors' customer programs are likewise preserved and unencumbered until paid over to the debtors.
• Cutting the other way, any lease, license or other contract provision requiring a landlord's or counterparty's consent, or the payment of fees to a governmental entity, before a debtor may pledge, sell or assign that interest is deemed inconsistent with the Bankruptcy Code and given no force or effect against the postpetition lien grants under the interim order.
• The DIP obligations are not discharged by confirmation of a plan notwithstanding section 1141(d) unless paid in full on or before the plan effective date, and the interim order's liens and claims survive confirmation, conversion, dismissal or withdrawal of the reference.

Prepetition Capital Structure

• As of the petition date the debtors carried approximately €503.3 million ($583.9 million) of funded debt, of which approximately €484.7 million ($562.3 million) was secured.
• Prepetition Bonds: 14.500% senior secured bonds due Aug. 14, 2029, issued May 14, 2024 in the amount of €340 million ($394.4 million) and tapped in October 2024 for a further €40 million ($46.4 million), bringing the issue to €380 million ($440.8 million). The bonds are secured by a first-ranking Latvian law commercial pledge over a substantial portion of the debtors' assets, with U.S. Bank Trustees Limited as trustee and security trustee. On Aug. 17, 2026, bondholders approved resolutions converting the Aug. 14, 2026 and Nov. 14, 2026 cash coupons to PIK and waiving certain minimum liquidity covenants. Approximately €393.8 million ($456.8 million) of principal was outstanding at filing, plus approximately €4.4 million ($5.1 million) of accrued interest.
• BluOr Bank Secured Facility: a €10 million ($11.6 million) five-year facility issued in August 2025 to refinance construction of the debtors' cargo hangar at Riga International Airport, bearing six-month EURIBOR plus a 5.5% margin, amortizing monthly and maturing in July 2030, secured by the hangar and the related land use rights. Approximately €7.9 million ($9.2 million) was outstanding at filing. The DIP liens sit junior to this facility.
• Finance Leases: eight aircraft, seven spare engines and a flight simulator, with approximately €78.6 million ($91.4 million) outstanding. Seven of the finance-leased aircraft are Airbus A220-300s owned by Lidmasinas Leasing Limited, leased to Axiom Baltic Services Ltd. and subleased to the debtors; the remaining aircraft and the seven spare engines are owned by Jet Aircraft Leasing Limited and leased directly to the debtors. All of this equipment is subject to first-priority mortgages in favor of Export Development Canada, with loan terms running seven to twelve years. The leases carry nominal-price purchase options at expiry, which the debtors intend to exercise with Tranche 1 proceeds.

Adequate Protection

Prepetition Bondholders

• Subject to entry of both the final order and the Priming Order, the trustee for the prepetition bonds receives perfected, silent junior liens on unencumbered property of the debtors and, once the associated finance leases are repaid, on the Schedule 3(a) aircraft collateral: the eight A220-300 aircraft and the seven PW1521G-3 spare engines. Both grants sit subordinate to the Carve-Out and the DIP liens, and neither springs into effect until Tranche 2 is funded.
• Provided the debtors maintain unrestricted cash of at least €10 million after the Tranche 1 funding and at least €20 million after the Tranche 2 funding, and solely after Tranche 2 is borrowed, the debtors may — but are not obligated to — pay the reasonable documented out-of-pocket postpetition fees and expenses of one primary and one local counsel to the trustee, and current cash interest on the bonds at the non-default rate.
• The adequate protection liens are junior and silent relative to the DIP liens, and the DIP Lenders control credit-bid rights over any DIP collateral subject to them.
• The debtors assert the bondholders are undersecured and that adequate protection is therefore required only up to the value of their collateral; they further argue the going-concern preservation and the roughly €170 million of value unlocked by the EDC payoff supply protection under sections 361(2) and 361(3). Those positions will be tested at the hearing on the Priming Order, which is not before the Court now.

Carve Out

• Post-Trigger-Notice Carve-Out Fee Cap: €6 million for professional fees incurred after delivery of a Carve-Out Trigger Notice
• Chapter 7 Trustee Fee Cap: $75,000
• Allowed professional fees incurred before delivery of the trigger notice, whenever allowed and without regard to whether the approved budget provides for them, plus U.S. Trustee and clerk fees
• The Carve-Out excludes restructuring, sale, consummation or success fees of any professional, with a negotiated exception for Seabury Securities LLC, whose restructuring, sale, consummation, financing or similar fee is included to the extent its engagement letter is approved by the Court.
• A trigger notice may be delivered only upon a continuing event of default and acceleration, and is deemed both a demand to sweep all cash on hand into a segregated fee reserve account held in trust and a pro rata draw request under the facility to the extent cash is insufficient. The agent may not sweep or foreclose on cash until that account is fully funded. Funds in the account are not DIP collateral and are not subject to the DIP liens or superpriority claims, though the agent holds a reversionary interest in any residue after all Carve-Out amounts are paid in full.
• The Carve-Out is senior to the DIP liens and DIP superpriority claims.

Credit Bid

• Subject to entry of the interim order, the DIP Collateral Agent, acting at the direction of the Majority DIP Lenders and directly or through one or more acquisition vehicles, may credit bid all or any portion of the outstanding DIP obligations in any non-ordinary course sale of the debtors' assets under section 363, under a plan, by a Chapter 7 trustee under section 725, or otherwise, pursuant to section 363(k), to the exclusion of all others until the DIP obligations are indefeasibly repaid in full.
• The agent may assign, sell or otherwise dispose of the credit-bid right to any acquisition entity or joint venture formed in connection with such a bid.

Avoidance Actions

• Avoidance actions are excluded from the DIP collateral under the interim order. Upon entry of the final order, the DIP liens attach to avoidance action proceeds and to the right, following an event of default, to bring, direct and control such actions subject to commercial reasonableness. Until the final order is entered, the superpriority claims likewise have no recourse to avoidance actions or their proceeds.

Financial Covenants and Permitted Variance

• Minimum Liquidity: unrestricted cash of €10 million at all times after the Tranche 1 funding, rising to €20 million after the Tranche 2 funding, tested at each calendar month end based on the variance report delivered the following Friday
• Budget Compliance: tested every fourth Friday beginning four weeks after the petition date, against the four-week trailing period, on a cumulative basis:
  • Total cash receipts may not fall below 85.0% of the approved budget
  • Total cash disbursements, excluding professional fees, may not exceed 115.0% of the approved budget
• Minimum LTM Plan EBITDAR: to be set at 25% below the business plan once that plan is delivered and accepted, tested quarterly on a trailing twelve-month basis, excluding professional fees, revaluation gains and losses from FX, ETS prices, interest rates and fuel, asset sale gains and losses, and restructuring or one-off charges
• Budget mechanics: the initial 13-week budget was due two days before the petition date, but the exhibit annexed to the proposed interim order to carry it is marked "To be filed," so the forecast itself is not yet in the record. Updated rolling 13-week budgets are delivered each Friday beginning the second full week after filing and become the approved budget only if acceptable to the Majority DIP Lenders in their sole discretion. Budgets must include aircraft lease and adequate protection payments. The approved budget must be delivered to any creditors' committee's lead counsel and financial advisors once approved.

Covenants

• Affirmative covenants center on preserving the collateral and the airline's ability to fly:
  • Maintain all operating licenses, air operator certificates and airport slots material to the business
  • Maintain insurance consistent with aviation industry practice and lender requirements; net cash proceeds or insurance proceeds from the sale or total loss of aircraft collateral must be applied to the DIP obligations
  • No aircraft or engine maintenance deferrals without Majority DIP Lender consent
  • Maintain and produce on request all technical records for the aircraft collateral, and provide the arranger, lenders and their aviation asset servicers and technical advisors access to the aircraft, engines, records, maintenance logs and disk sheets for inspection on five business days' notice, with no notice required while an event of default continues; absent a default, inspections must comply with safety, security and operational requirements and may not unreasonably interfere with operations or scheduling
  • Within 30 days of the petition date, unless waived by the Majority DIP Lenders, transfer the aircraft collateral to a newly formed Cayman Islands subsidiary or special purpose entity and cause it to become a debtor in a procedurally consolidated case and a borrower and obligor, so long as doing so imposes no undue burden or expense and no adverse tax consequence
  • Perfection deliverables: for the specified aircraft collateral, a New York law mortgage, Cape Town registrations and UCC filings, irrevocable deregistration and export request authorizations and related powers of attorney, all promptly after the initial Tranche 1 funding, together with satisfactory insurance and reinsurance certificates at funding, a Latvian commercial pledge with commercial registry and aviation authority filings within 30 days, and airframe and engine warranty agreements within 30 days; for the CAE Airbus A220-300 series 7000XR full flight simulator, serial number 121164, a Latvian commercial pledge and registry filings; for the Schedule 2 junior lien collateral, a Latvian mortgage and related filings upon the initial funding; and for all other collateral, a Latvian commercial pledge and registry filings on the funding date
  • Customary information and reporting obligations, including detailed consultation and status updates on exit financing, equity contributions and milestone progress, and wind-down and collateral liquidation provisions covering any enforcement
• Negative covenants prohibit, without prior written Majority DIP Lender consent:
  • Incurring liens other than the Carve-Out, liens existing on the closing date, the adequate protection liens, and other liens securing obligations not exceeding €10 million in aggregate principal amount outstanding
  • Disposing of DIP collateral other than through court-approved sales acceptable to the Majority DIP Lenders, dispositions that would satisfy the DIP obligations in full in cash, ordinary course sales, dispositions of obsolete or surplus property, and other dispositions not exceeding €10 million of aggregate fair market value; in every case, no disposal of the Initial Tranche 1 DIP Collateral is permitted without consent
  • Incurring indebtedness other than the DIP obligations, debt outstanding on the interim closing date, new aircraft leases, Specified Financing on terms satisfactory to the Majority DIP Lenders, and other debt not exceeding €10 million outstanding
  • Amending any organizational document
  • Any expenditure, Restricted Payment, investment, loan or other payment outside the approved budget after giving effect to permitted variances, other than ordinary course payments and distributions for business operations, capped at €250,000 in aggregate, to the two non-debtor subsidiaries: airBaltic Switzerland GmbH, a Swiss entity with no material assets, and Aviation Crew Resources, AS, which is in Latvian liquidation proceedings
  • Paying prepetition indebtedness, except as contemplated by the term sheet and DIP orders, as authorized by an order acceptable to the Majority DIP Lenders, or as adequate protection payments
• "Restricted Payment" captures dividends and distributions on equity, payments on account of the purchase, redemption, defeasance or retirement of equity, management and similar fees, and payments to redeem or obtain the surrender of warrants, options or other rights to acquire equity.

Milestones

• Tranche 1:
  • Petition date no later than Sept. 14, 2026 — satisfied
  • Entry of the interim order within five days of the petition date, including approval of the transfer of the aircraft collateral to a borrower, the first-priority liens (second priority as to the Schedule 2 collateral), and the transactions effecting the EDC payoff
• Tranche 2, in addition to the Tranche 1 milestones remaining satisfied:
  • Entry of the final order within 35 days of the petition date
  • File a motion rejecting aircraft leases consistent with the restructuring plan within 59 days
  • Deliver a business plan acceptable to the Majority DIP Lenders and DIP Arranger within 60 days, incorporating a performance improvement plan and a leverage profile supporting the Tranche 1 and Tranche 2 loan levels
  • Execute non-disclosure agreements, with synergies sized and initial commercial terms provided, with at least two potential equity providers within 80 days
  • Reasonable confirmation that the final order DIP collateral is respected and enforceable in the applicable jurisdictions
  • Within 100 days: binding term sheets with aircraft lessors covering fleet right-sizing and revised lease terms for 75% of the fleet; binding term sheets with Pratt & Whitney, Airbus and Lufthansa; delivery of the performance improvement plan; and filing of an acceptable plan and disclosure statement providing for repayment of the DIP obligations in full in cash on the effective date or other treatment acceptable to the lenders
  • Within 120 days: file a motion to approve the disclosure statement; obtain a binding equity commitment term sheet from the Government of Latvia and/or one or more strategic investors or plan sponsors; obtain a commitment from the Government of Latvia to support the plan; and execute binding term sheets for committed exit financing
  • Assume the Lufthansa wet leasing agreements within 30 days of the petition date, with Lufthansa holding a consultation right over any extension
• Tranche 3, in addition to the foregoing: enter into any additional documentation needed to consummate the fleet right-sizing and revised lease terms within 140 days, and obtain disclosure statement approval within 160 days
• General: confirmation order within 210 days, and an effective date no later than the earlier of nine months after the petition date and 250 days after the Tranche 1 closing
• The Equity Commitments and Binding Exit Commitments must together exceed the amounts needed to fund the business plan and to repay the DIP obligations in full, must be free of contingencies to the extent of the DIP obligations, must be pledged to the DIP Agent with the secured parties as express third-party beneficiaries holding the exclusive right to sue for breach, must be approved under the final order so the lenders can enforce them and effect a payoff on five business days' notice, and may not be assigned to anyone other than the original financiers.
• Compliance is determined by the Majority DIP Lenders and the DIP Arranger in their sole reasonable determination, and they may extend any or all milestones by notice.

Events of Default and Remedies

• Events of default include, among others:
  • Breach of the minimum liquidity covenant, or failure to comply with any provision of the term sheet including the financial covenants, subject to a one business day grace period for updated budgets and variance reports
  • Entry of a final order approving the facility, or of final documentation, in a form or substance not acceptable to the Majority DIP Lenders
  • Material breach of any representation, warranty or covenant, subject to cure periods
  • Loss of, or material impairment to, the air operator certificate or any airport slot material to operations
  • Any lien over the aircraft collateral or the simulator ceasing to be valid, binding, perfected and enforceable or suffering impairment of priority; the same as to any material portion of other collateral; or a total loss of aircraft collateral not covered by insurance or where proceeds are not distributed as required
  • Failure to satisfy any milestone by its deadline
  • A debtor request to reverse, modify, stay or vacate any DIP order, or a debtor filing seeking to revoke or modify the term sheet, credit documentation or DIP orders or to disallow the DIP obligations
  • Any debtor commencing or supporting an action against the agent or lenders to subordinate or avoid the DIP liens
  • Filing an application for, or entry of an order approving, a section 507(b) claim or any lien pari passu with or senior to the DIP obligations or DIP liens, other than the Carve-Out and the liens under the DIP orders
  • Filing a section 363 sale motion for all or substantially all of the DIP collateral that does not provide for payment of the DIP obligations in full in cash at closing, without Majority DIP Lender consent
  • Appointment of a trustee, receiver, examiner or responsible officer with enlarged powers
  • Relief from stay granted to any other creditor as to DIP collateral with an aggregate value above €10 million
  • Conversion or dismissal of any case, termination of the interim or final order other than by repayment, or termination of exclusivity
  • Filing a plan or disclosure statement not acceptable to the Majority DIP Lenders unless it repays the DIP obligations in full in cash on the effective date
  • Commencement of insolvency, liquidation or enforcement proceedings not contemplated by the term sheet
  • Cross-default on material indebtedness above a threshold to be agreed, and any material adverse change in the value, condition or enforceability of the collateral package
• The interim order modifies the automatic stay so that, immediately upon a DIP event of default and without further order, the agent acting at the direction of the Majority DIP Lenders may deliver a default notice to the debtors, the creditors' committee and the U.S. Trustee; terminate, reduce or restrict any remaining commitments; and declare the DIP obligations immediately due and payable, with that declaration subject to the Carve-Out and effective five business days after delivery of the notice to the debtors and their lead restructuring counsel (the "Remedies Notice Period").
• Following expiration of the Remedies Notice Period, the stay terminates automatically as to the secured parties, who may then, without further notice or order unless the debtors, a committee, another party in interest or the U.S. Trustee first obtains an order preventing the action:
  • Terminate and revoke the debtors' right to use cash collateral or facility proceeds, other than for the Carve-Out or to satisfy the DIP obligations
  • Bring any action at law or other proceeding, including for specific performance
  • Foreclose on and take enforcement action against all or any portion of the collateral, including freezing cash in the debtors' accounts
  • Set off amounts in accounts maintained by the debtors and enforce against collateral in the secured parties' possession, including disposition and application of net proceeds
  • Exercise any other right or remedy under the credit documentation or applicable law, including under the New York UCC and the Cape Town Convention and Protocol
• During the Remedies Notice Period the debtors may not request further draws, except as needed to fund the Carve-Out reserve, and the debtors, any committee, any other party in interest and the U.S. Trustee may seek an emergency hearing on whether a default has occurred and is continuing and on any appropriate relief including non-consensual use of cash collateral; the secured parties are deemed to consent to such a hearing.
• All proceeds realized on exercise of remedies are applied, and turned over as necessary, under the interim order, term sheet and credit documentation. Under the term sheet's payment waterfall, proceeds go first to agent fees, indemnities and expenses, then to lender expenses, then to lender premiums and fees, then to accrued interest, then to principal, then to all other lender amounts, with any balance to the debtors.

Waivers

• Subject to entry of the final order:
  • Section 506(c): no costs or expenses of administration may be charged against the DIP secured parties or the DIP collateral, with the Carve-Out expressly excepted
  • Section 552(b): waiver of the "equities of the case" exception with respect to the prepetition bond collateral
  • The equitable doctrine of marshaling and any similar doctrine will not apply to the DIP collateral
• The DIP secured parties are deemed to have extended credit in good faith and entitled to the full protection of section 364(e) notwithstanding any later modification, vacatur, stay or reversal of the interim order.
• The interim order stipulates nothing as to the validity, extent or priority of the prepetition bond liens and fixes no challenge deadline, consistent with the deferral of priming to the final order. It does find that, as of entry, no claims or causes of action against the DIP agent or the other DIP secured parties exist that the debtors could assert, and that none of the DIP secured parties is a control person or insider of the debtors by virtue of the facility.

Marketing Process

• The debtors retained Seabury Securities LLC in March 2026 as investment banker and financial advisor to evaluate an out-of-court, Chapter 11 or other judicial restructuring. Working alongside Milbank and Clyde & Co, Seabury concluded the company needed to raise significant capital, and the debtors initially pursued an out-of-court raise.
• The company solicited interim financing from an ad hoc group of prepetition bondholders and from institutions experienced in distressed lending, receiving term sheets from four potential third-party lenders. Those negotiations stalled because a significant portion of the assets already secured the prepetition bonds and bondholder consent would be required to grant additional liens on that collateral. The company accordingly concluded the ad hoc group was the most viable source of interim capital.
• After weeks of arm's-length negotiation and numerous exchanged term sheets, the ad hoc group's best and final proposal contemplated an out-of-court bridge to a U.K. restructuring proceeding, required priming liens on bondholder collateral, carried a very short maturity that would have compelled the debtors to secure equity commitments within that window, and contained expensive economics.
• In August 2026, with jet fuel prices spiking on the Iran conflict and liquidity deteriorating, the debtors began a prepetition DIP marketing process while continuing parallel negotiations with the ad hoc group. They obtained term sheets from three parties. Prospective new lenders were unwilling to lend unsecured or junior to the bond liens, telling the debtors there was insufficient unencumbered collateral to support a facility large enough to meet their needs; the complexity of the aircraft financings further narrowed the field. SVP, one of the proposing parties, then ran its own syndication, and the debtors signed confidentiality agreements with ten additional institutions.
• The debtors used that competitive tension to extract non-priming liens on the Initial Tranche 1 DIP Collateral at the interim stage, extended milestones providing additional time to pursue equity financing, and improved economics relative to the ad hoc group proposal. The facility was evaluated and vetted by the independent and disinterested directors of Air Baltic Corporation AS. The debtors selected it as the only credible proposal that did not contemplate priming upon entry of the interim order, citing the immediate funding need, the size and certainty of the committed amount, the interest rate, the reasonableness of the conditions precedent and financial covenants, and the lenders' other contractual commitments.

Miscellaneous

• As of the interim closing date, the definitive documentation consists of the interim order, the DIP term sheet and the agency fee letter; the Majority DIP Lenders may require the debtors to enter a full credit agreement, execution of which is itself a condition precedent to the remainder of Tranche 1 and to Tranches 2 and 3. Where the term sheet and a DIP order conflict, the order controls.
• Amendments require the consent of lenders holding more than 50% of commitments and loans, with sacred rights — including increases in commitments, extension of maturity, reductions in or postponement of principal, interest or fees, alterations to pro rata treatment, subordination of the guarantees or liens, and releases of all or substantially all of the guarantees or collateral — requiring each directly and adversely affected lender. Modifications of the DIP orders that are materially adverse to any lender require that lender's approval. Commitments or loans held by insiders are excluded from voting.
• Lenders may assign freely to other lenders, lender affiliates and approved funds, the Fronting Lender may assign under the fronting arrangements, and every transfer restriction lapses while an event of default is continuing; absent a default, other assignments and sub-participations may not be made to Disqualified DIP Lenders, defined as airline competitors of the borrower identified in writing to the agent and their affiliates, with the agent owing no duty to monitor that schedule. The minimum assignment is €250,000, with no minimum for Fronting Lender assignments, and a $3,500 recordation fee applies except for affiliate, approved fund and fronting assignments.
• Special mandatory redemption: where the Fronting Lender reasonably determines a legal or administrative bar prevents a commitment party from purchasing its allocation, the other lenders may purchase those loans at par plus accrued interest and fees within five business days; if they do not, the borrower must prepay that portion on a non-pro rata basis at par without premium or penalty, plus accrued interest, on two business days' notice.
• The debtors are authorized to advance funds, including loan proceeds, among the loan parties and their affiliates in accordance with the approved budget, and intercompany obligations owed by any debtor are collaterally assigned to the DIP Agent until the DIP obligations are paid in full.
• Governing law is New York, except as governed by the Bankruptcy Code, with non-exclusive submission to the Bankruptcy Court or, failing jurisdiction there, to state or federal courts in New York County, and a jury trial waiver. A customary EU and UK contractual bail-in clause applies. The debtors gross up for withholding taxes and indemnify the agent, arranger and lenders for other taxes on LSTA-consistent terms.
• Prepetition creditors are barred from taking or failing to take any action that would impede the EDC/Axiom payoff and the substantially concurrent collateralization of the finance lease collateral, and the debtors may not grant liens on contemplated DIP collateral to anyone other than the DIP secured parties. The secured parties need not file proofs of administrative claim.

Key Dates

• Petition date: Sept. 14, 2026
• Interim hearing: Sept. 15, 2026
• Interim order deadline: five days after the petition date
• Final order deadline: 35 days after the petition date; the motion asks the Court to schedule the final hearing within approximately 25 days of filing, and the proposed order leaves the final hearing date and time blank. Where the final order also serves as the Priming Order, the parties must file its form at least 14 days before the hearing, with objections due at least three days prior; otherwise the form is due at least seven days before the hearing, with the same objection deadline.
• Commitment expiry: the lenders' commitments terminate automatically if the Court does not enter the interim order within five calendar days of the petition date, unless waived under the term sheet.