Sunday, 3 May 2020

Norwegian's survival more assured as bondholder deal on $1.2 billion debt-for-equity swap agreed

Photo Norwegian
There could be light at the end of the very long tunnel for the budget carrier Norwegian Air as the firm confirmed on Sunday that it had support from enough bondholders for a $1.2 billion debt-for-equity swap, a certain lifeline the airline needed to survive the ongoing coronavirus COVID-19 crisis.

There was little doubt the airline was on the road to bankruptcy as cash was running out fast,  two of its subsidiary pilot and crew firms in Denmark and Sweden have already filed for bankruptcy. And, the airline was expected to run out of cash by 11th May had it not found some other financial support.

The carriers bondholders had, according to news agency Reuters, turned down Norwegian's plan on Friday, however, after more discussion and negotiation on Sunday the firm announced it had secured a written agreement with the largest bondholders of the NAS07,  although it hasn't commented on the name or what improvements to the original deal were.

The airline had previously had the support of three other bondholders for the deal but needed at least 67% of the voting rights to give the go-ahead for the arrangements.  "I am pleased to confirm that we have reached an agreement with the bondholders,” CEO Jacob Shram said in a statement, which said that a vote will still need to take place on May 18 to ensure Norwegian Air secures the necessary 67% support.

Part of the collateral for the agreement is the airline's slots at London Gatwick Airport, which means the value of their bonds after the conversion may be increased by up to 38%, against 20% earlier, based on valuations of the Gatwick slots.

The airline really needs this to be agreed soon,  for if British Airways confirms it is pulling out of London Gatwick all together because of the downturn in business caused by the ongoing crisis, there will be an abundance of slots available at the Sussex airport and the relative value will go down,  rather dramatically. 

Another step for the airline is to secure more support from its aircraft lessors for its rescue plan, ahead of an extraordinary general meeting scheduled for tomorrow to get approval from shareholders.
Also on Monday, Norwegian is set to decide the timeline for the launch of a share issue, which will end on May 18. The airline has said it plans to raise 400 million crowns.

If successful, the debt-to-equity plan allows the carrier to tap government guarantees of up to 2.7 billion Norwegian crowns ($265 million), which hinge on a reduction in its debt to equity ratio, on top of 300 million crowns it has already received.

This is a worrying time for other companies that support Norwegians operations as the carrier is only concentrating on paying bills that are vital to continuing its limited operation.  Including the wages of the small number of staff still employed, critical IT infrastructure and fuel.  other debts including leases, ground handling and other debts on hold for the time being. 

Additional reporting by Gwladys Fouche
Norwegian Boeing 787 at London Gatwick                                                          Photo Norwegian 

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