Air France-KLM gets $560 million cash injection from Apollo

(Reuters) -Air France-KLM said on Friday it had signed a definitive agreement with private equity firm Apollo Global Management for a 500 million euro ($561 million) capital injection for one of its engineering and maintenance units.

Sale and leaseback deals are common financing mechanisms in aviation. But a flood of investment from new sources of funding has increased competition for traditional leasing companies.

The financing from Apollo will be used for the French company's Engineering and Maintenance (MRO) components activity and it will not result in a change of ownership of the division nor will it have any impact on employees' contracts, the company said.

Apollo will subscribe to perpetual bonds bearing an interest rate of 6.9% for the first three years, after which gradual step ups and caps will be applied, the company said.

Air France will have the ability to redeem them at any time after three years.

Air France-KLM and Apollo Global Management entered into a similar solution last year where the private equity firm invested 500 million euro in the company to help repay French state aid.

($1 = 0.8913 euros)

(Reporting by Michal Aleksandrowicz in Gdansk; editing by David Evans)