Norwegian Air's shares plummeted on Tuesday April 14, and have now eroded almost their entire value from a 2015 peak, due to the airline's survival depending on creditors accepting a rescue plan that was proposed last week.
The shares slumped as much as 62.5% as markets reopened after the Easter holidays. It was the first time they had traded since the airline outlined its rescue plan on April 8, which would convert $4.3 billion of debt into equity, and raise some new equity, wiping out much of the remaining value of the company's current shares.
The shares later regained some ground to trade at 5.8 crowns by 0917 GMT (April 14), down 29% on the day - a loss of 97% from their all-time high in May 2015.
"End Of The Line"
Even before the outbreak of the coronavirus, Norwegian Air faced financial problems after becoming overburdened with debt after a fast expansion in recent years.
"Norwegian is at the end of the line. Yet there is hope for the airline and pending creditor agreement, it may continue to fly," analysts at brokerage Bernstein noted, adding that the company needs at least 2.7 billion crowns of equity.
"Rounded to the nearest Krone [crown], existing shares are all but worthless," the brokerage said.
The budget carrier has grounded most of its fleet due to the impact of the COVID-19 outbreak on travel, and it announced the temporary layoff of 7,300 staff on March 16, which is approximately 90% of its workforce.
Convince Bondholder Or Face End Of Operations
In order for the company to stay in business, it must also convince bondholders to accept the proposed conversion of debt, Bernstein noted.
"If they do not, then we expect operations to cease, bankruptcy proceedings to start, and shareholders to get nothing," it added.
Under-Performing Other Airlines
Before April 14's fall, Norwegian's shares were down 78% this year, under-performing other major European airlines, which were down between 30% and 60%.
The airline must now convince its creditors to agree to the rescue plan before it is put to a shareholders' vote on May 4.
The Oslo stock exchange said on April 14 that trading in Norwegian's shares will be subject to special observation until there is further clarification about the airline's situation.
Special observation is used under circumstances that may make the valuation of a security particularly uncertain, according to the market operator's guidelines.