Bonds issued by Air Baltic Corp slumped further into deeply distressed levels after the ailing Latvian airline announced plans to swap much of its debt for equity as part of a restructuring plan. The debt-for-equity swap is intended to reduce the airline's heavy leverage, which has been worsened by pandemic-related travel disruptions. As a result, existing bonds have fallen to deeply distressed levels, reflecting heightened investor concern over potential losses.

The restructuring plan requires approval from bondholders and regulators, and its success is critical for the airline's financial survival. Air Baltic, majority-owned by the Latvian government, has not provided further details on the timeline or terms of the swap. Market participants are closely watching the process, as it will determine the outcome for bondholders and the airline's long-term viability.

The bonds' continued decline indicates that investors are pricing in significant risk of default or heavy dilution.