In 2015 Etihad created an Amsterdam-based special purpose vehicle “SPV Equity Alliance Partners” which issued bonds for Etihad and other airlines it controlled. Etihad has since walked away from its investments in Alitalia and air berlin, each of which reportedly held 19% of the debt.

With neither Alitalia nor air berlin making payments, this funding vehicle runs short on cash. There’s a liquidity pool that’s been used to cover payments that would have been covered by air berlin and Alitalia, but if that’s tapped to cover March and June payments when those come due the entity goes into a technical default because of low cash balances.

This would trigger a “remarketing event” in which defaulted debt obligations would be auctioned for cash, according to the documentation of the EAP bonds, a $700 million bond maturing in 2020 and a $500 million bond due to be repaid in 2021.

Before Etihad walked away from Alitalia sending it into bankruptcy they had agreed to repay Alitalia’s portion of the debt as part of the airline’s restructuring. The status of that commitment is now subject to the bankruptcy proceeding.

Etihad is discussing “how to support the bonds” given the “political and reputational pressure” not to default. It will be expensive for the Al Nahyans to cover the commitment, but embarrassing for them not to.