Scandinavian airline SAS kept its bid for survival aloft at the weekend by securing bridge financing through bankruptcy protection proceedings, sending its shares 5% higher on Monday 15 August.
The airline, whose biggest owners are Sweden and Denmark, said on Sunday 14 August it had signed a deal with US private equity firm Apollo Global Management for $700 million in financing to fund its reorganisation under US Chapter 11 bankruptcy protection proceedings.
SAS filed for the protection in July, a day after most of its pilots launched a crippling two-week strike over collective agreements. SAS said the action could scare off lenders and could threaten its existence.
Shares in SAS were up 5.3% at 1358 GMT on Monday 15 August, taking a one-month rise to 22%. The stock is still down 63% in the past year.
"The price of being on the brink of bankruptcy is high, but now the process is getting going, and the hard work of getting billions in debt dropped and also significantly reducing costs can be accelerated," Sydbank analyst Jacob Pedersen said.
"The reality remains that existing shareholders' assets are gone and that they are exposed to a big dilution when the capital increase is carried out," Pedersen said in a note to clients, reiterating a "sell" recommendation for SAS shares.
Pedersen said the deal with Apollo suggested Apollo could become a major shareholder in SAS by converting the loan to equity at the end of the Chapter 11 process.
A SAS spokesperson declined to speculate on potential new owners, but added Apollo apparently "believes in the company and the company's future".
"One should not speculate who will become owners at the end but it is a possibility, absolutely," said SAS vice-president of Investor Relations Louise Bergström.
SAS, which was loss-making before the pandemic due to rising competition from low-cost carriers, has said it needs to slash costs further and raise more capital to survive.
"We need to convert old debt, we need to take in new capital, so there are still many parts that must fall into place. But we now have a much better chance," said Bergström.
The Swedish government has rejected the plea for more cash but Denmark has said it might write off some debt and inject fresh funds if SAS found support from private-sector investors.
A Danish finance ministry spokesperson said on Monday 15 August the government had noted the bridge financing deal and repeated that its support for a rescue plan launched by SAS in February was conditional on the airline attracting new large shareholders.
Copenhagen also wants to maintain influence over a range of decisions to ensure SAS keeps a strong presence at Danish airports, something it says is important for the small Nordic country's economy and to keep good global travel connections.
SAS Secures $700m Financing To Aid Restructuring
The above news followed news that Scandinavian airline SAS said on Saturday 13 August it entered into an agreement with Apollo Global Management to raise $700 million of fresh financing it needs to see it through bankruptcy.
The airline filed for bankruptcy protection in the United States in early July to help cut debt after the collapse of wage talks between the airline and its pilots, triggering a 15-day strike that added to travel chaos across Europe.
SAS said in a statement it expects to complete the Chapter 11 restructuring process in nine to 12 months. The airline anticipates receiving court approval for its $700 million financing by the end of September.
SAS chief executive Anko van der Werff has said the strike accelerated its decision to file for Chapter 11 status.
The airline has said the industrial action had cost it more than $145 million, affecting 380,000 passengers in the peak summer travel season, and might jeopardize the firm's ability to secure additional financing.
SAS grounded some 3,700 flights during the strike, saying last week its number of passengers fell 32% in July from June and capacity by 23%.
Swedish, Danish and Norwegian pilot union members, who voted to adopt a collective bargaining agreement reached with SAS last month, say they will not resume their strike.
SAS, which was already loss-making before the pandemic due to rising competition from low-cost carriers, had said it needed to slash costs further and raise more capital to survive.
While the Swedish government has rejected the plea for more cash, Denmark says it might inject fresh funds if SAS also finds support from private-sector investors.