Norwegian Air seeks $4.3 bln debt-for-equity deal as crisis deepens
* Airline had almost $8 bln in debt at end-2019
* Company has expanded rapidly in recent years
* Stock is hardest hit in European airlines as coronavirus
* Company has grounded most of its fleet and put staff on
(Adds bondholder comment)
By Terje Solsvik and Victoria Klesty
OSLO, April 8 (Reuters) - Norwegian Air plans to
convert up to $4.3 billion of its debt into equity and to issue
new shares as it seeks to stay in business following the
COVID-19 outbreak that has grounded almost all of its fleet, the
budget carrier said on Wednesday.
The move would allow the airline to tap government
guarantees of up to 3 billion Norwegian crowns ($292 million),
which are dependent on the company reducing its ratio of debt to
Growing rapidly in the last decade to become Europe's
third-largest low-cost airline and the biggest foreign carrier
serving New York and other major U.S. cities, Norwegian had
accumulated debts and liabilities of close to $8 billion by the
end of 2019.
On March 16, the company announced temporary layoffs of
7,300 employees, about 90% of its workforce, and the following
day called on Norway's government for help, saying it needed
cash "within weeks, not months".
"The proposed measures are necessary in securing the next
tranches of the Norwegian government state guarantee program,"
Chief Executive Jacob Schram said in a statement on Wednesday,
announcing the measures on the eve of Norway's Easter break.
"They are also necessary for the future of the company by
strengthening the company's balance sheet," added Schram, who
joined the airline only last year, adding work had begun on
building the future "New Norwegian".
VOTE NEXT MONTH
The company must convince its creditors to agree to the plan
before it is put to a shareholders' vote on May 4.
If approved, Norwegian would convert part or all of its
bonds worth 5.68 billion crowns into shares as well as leasing
debt of up to 38.82 billion crowns, the company said.
It would also aim to raise at least 300 million crowns of
fresh cash by selling new shares, with the aim of reaching a
total of 400 million to meet government terms for its aid.
Those deals are far in excess of the company's market
capitalisation of 1.4 billion crowns and will significantly
dilute existing equity.
Asset manager Sissener AS, which holds bonds in Norwegian
with a nominal value of $5 million, but also shorted some stock,
said creditors may have few options but to accept the proposal.
Seizing the underlying assets would make little sense in the
current situation, the fund's founding partner Jan Petter
Sissener told Reuters.
"One of the bonds has a hangar as security, who needs a
hangar today? And the others, with security in slots at Gatwick,
they don't have much value today either," Sissener said.
On the other hand, foreign creditors may not see it the same
way, he added.
"It's the American bond holders that are calling the shots
and they may have a different agenda, I don't know how they will
The stock has plunged almost 80% over the past two months as
the crisis has engulfed the airline industry and deepened
Norwegian's existing financial difficulties.
While Norwegian quickly qualified for access to 10% of
government guarantees introduced to help businesses weather the
coronavirus crisis, it must convince financial creditors to
temporarily forego payments if it is to access the second
tranche, worth 1.2 billion crowns.
To access the final tranche, of 1.5 billion crowns, the
company must also raise equity, the government has said.
($1 = 10.2693 Norwegian crowns)
(Editing by Jan Harvey, Josephine Mason and Keith Weir)
First Published: 2020-04-08 15:39:09
Updated 2020-04-08 18:57:21
© 2020 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.