Scandinavian Airline SAS Gets Rescue Deal From Castlelake-Led Investor Group
October 03 2023 - 12:59PM
Dow Jones News
By Dominic Chopping
STOCKHOLM--SAS is set to be taken over by an investor group led
by Castlelake, which plans to pump over $1 billion into the
struggling airline, averting the threat of bankruptcy.
In the deal, the group will invest a total of $1.18 billion for
majority control of the Scandinavian airline, wiping out existing
shareholders and bringing an end to SAS's 22 years as a listed
company.
The investor group will own around 86% of the airline, with U.S.
investment firm Castlelake taking a 32% stake, the Danish state
increasing its stake to 25.8% from 21.8%, Air France-KLM with 19.9%
and Lind Invest, 8.6%.
"This is a significant achievement of our transformation plan,"
SAS Chairman Carsten Dilling said in a statement. "Securing new
capital is one of the key pillars in the SAS Forward
[transformation] plan and will provide a strong financial
foundation to help drive our airline forward and facilitate our
emergence from the U.S. chapter 11 process."
Like most airlines, SAS was severely weakened by the Covid-19
pandemic, when the company saw its revenue plummet, its cash
reserves dwindle and its debt increase. Grappling with debt and
cut-throat competition from low-cost carriers, SAS launched a
restructuring plan early last year.
SAS aimed to adjust its cost base from top to bottom under the
restructuring, slashing annual costs by SEK7.5 billion while
cutting or converting SEK20 billion of debt and raising capital.
But shortly after launching the plan, around 1,000 SAS pilots went
on strike, worsening finances and prompting SAS to file for Chapter
11 bankruptcy.
SAS has sought to push through the comprehensive measures at a
faster pace under Chapter 11, continuing to operate while
negotiating with stakeholders.
As part of the process, earlier this year it began seeking new
investors to inject cash into the reorganized business. Tuesday's
deal includes $475 million in new unlisted equity, $700 million in
secured convertible debt and $500 million in refinancing by
Castlelake of SAS's current debtor-in-possession term loan.
As a result of the agreement, existing shareholders will be left
with nothing and SAS plans to delist its shares during the second
quarter of next year. Commercial hybrid bond holders are only
expected to receive a modest recovery in their debt.
The governments of Sweden and Denmark each held a 21.8% stake in
SAS before Tuesday's agreement. Denmark previously suggested it was
open to injecting fresh funds and writing off debts, contingent on
other investors contributing and as long as the government
maintained some influence in SAS. Copenhagen Airport is SAS's
largest hub and a key transit route, which Denmark is keen to
maintain.
Sweden had previously rejected a plea for more cash, instead
lending support to converting its debt into equity. It isn't part
of the new investor consortium and will no longer be a shareholder
in the airline.
SAS added that it intends to eventually join the SkyTeam
Alliance, of which Air France-KLM is a founding member, and exit
the Star Alliance, subject to any relevant approvals and emergence
from the Chapter 11 process.
The deal remains subject to relevant approvals and emergence
from the Chapter 11 process, while details and final documentation
for the agreed transaction structure are yet to be finalized.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
October 03, 2023 12:44 ET (16:44 GMT)
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