Experts on Air Baltic bonds: When creditworthiness no longer holds, the risk must be paid for with a high coupon

Air Baltic is seeking new bond financing at an annual interest rate of as much as 25%, a level experts say exposes the depth of the airline's credit problems.

The unusually expensive borrowing would compensate investors for taking on what is presented as a heightened risk. The article links the proposed coupon directly to the deterioration in Air Baltic's ability to attract credit on ordinary terms.

The warning is reinforced by the market performance of an existing Air Baltic bond. Its price has fallen by more than three-quarters, pointing to a sharp loss of investor confidence in the airline's debt.