Scandinavian Airlines (SAS) has confirmed the winning consortium involved in its $1.2bn restructuring process, with the aim of continuing to participate in the market as a “strong competitor”.
SAS filed for Chapter 11 bankruptcy protection in the US in mid-2022 as it struggled to balance its finances with lower passenger numbers.
A strong financial foundation [will] help drive our airline forwardCarsten Dilling
As part of that process, the airline is establishing agreements with key stakeholders, restructuring financial obligations and rearranging its fleet. SAS will also be delisted from the Copenhagen, Oslo and Stockholm stock exchanges and existing shareholders will have their stakes cancelled without compensation.
The restructuring involves a consortium including Castlelake, Air France-KLM, Lind Invest and Danish state investment instruments. The takeover is pending U.S. Court and European Union approval, expected by SAS in early 2024.
SAS explained that Castlelake is set to be the majority shareholder, holding 32% of the equity which will equate to 55.1% of convertible debt.
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The transaction structure determines a $1.17bn reorganisation investment, which includes $475m in equity finance and $700m in secured convertible debt.
SAS board chairman Carsten Dilling emphasised how the secured equity deals will progress the company’s future.
Dilling said: “This is a significant achievement of our transformation plan, SAS FORWARD. We have carried out a broad, competitive and thoroughly evaluated equity solicitation process and we are confident that the selected bid is the most favourable for SAS, its creditors and other stakeholders.
“Securing new capital is one of the key pillars in the SAS FORWARD plan and will provide a strong financial foundation to help drive our airline forward and facilitate our emergence from the US Chapter 11 process.”
Subject to the process, SAS is expected to join the SkyTeam Alliance and leave the Star Alliance, of which it was a founding member.
Air France-KLM is set to invest $144.5m allowing them a 19.9% equity stake, which equates to 5% of the convertible debt. According to reports by CNN, Air France-KLM have options for a “much larger” stake in two years’ time and may choose to buy overall control.
Air France-KLM CEO Benjamin Smith emphasised how this equity deal will boost the company’s influence across the Nordic region, saying: “This is an important day for SAS and for Air France-KLM. We are pleased to be part of the winning bidding consortium selected by the board of SAS. Air France-KLM looks forward to establishing strong commercial ties with SAS.
“With its well-established position in Scandinavia and strong brand, SAS offers tremendous potential to Air France-KLM. This cooperation will allow Air France-KLM to enhance its position in the Nordics and improve connectivity for Scandinavian and European travellers. We look forward to being a part of this new chapter in SAS’ history and thank the board of SAS for their trust.”
According to the Scandinavian airline, company operations are to proceed as normal with “due care throughout this process”.