Thursday, 11 March 2021

Crunch time for Norwegian as restructuring plan goes to courts

Today, this once mighty European budget carrier Norwegian has sent its drastic financial reconstruction plan to creditors, shareholders and courts. This plan needs to be approved by both the Irish and Norwegian courts in the next few weeks to enable the struggling carrier to put in to action its reconstruction plan. If the plan is rejected, the firm may not be able to raise enough capital to keep going. 

Jacob Schram, CEO of Norwegian issued the following statement:  “We have had many constructive and challenging negotiations with creditors since the indicative plan was presented on January 14th. The Examiner in Ireland and the Reconstructor in Norway both believe that this plan is in the interest of the creditors and shareholders of the company. This is an important milestone in the process of securing Norwegian’s future.”

The Examiner will firstly present formal proposals for the restructuring based on the plan presented to the creditors of the company. Following the necessary creditor meetings the proposals will then be presented to the Irish High Court for approval. The proposals outline how creditors will be dealt with in the actual reconstruction. Unsecured creditors who will not participate in the planned capital raise, will be entitled to cash and a dividend totalling to around five percent. The dividend claims may be converted to shares, in total representing approximately 25 percent of the company’s share capital following the restructuring. New investors in the capital raise will receive approximately 70 percent of the post-restructuring share capital, and current shareholders approximately five percent.

Geir Karlsen, CFO of Norwegian, said: “It is hoped that the Irish High Court will make their final decision within the next couple of weeks. If approved by the Irish Court, the plan will be dealt within the reconstruction process in Norway. If everything goes according to plan, we will be able to carry out the capital raise in May.”

This airline has refunded most passengers who have had flights cancelled, however over 3% have not had a refund and will not be getting one,  at least not for now.  The firm is trying to blackmail the courts by warning it can't refund everyone until the reconstruction plan is approved.   “We have wanted to ensure full refunding of outstanding claims throughout the reconstruction, and we are sorry that this will not be possible,” said Karlsen.

The tangled web of companies Norwegian's management has used to bankrupt some parts of the business whilst moving funds from other subsidiary firms in order to avoid paying full redundancy payments to former staff is currently being investigated.  

The company is also in a legal dispute with planemaker Boeing over a number of new planes the airline had ordered a the height of its popularity and before the onset of the global pandemic, which are now surplus to requirements. The firm also recently settled a similar disagreement with European manufacturer Airbus over a deal for 88+ aircraft the airline no longer has a need for. A deal was only reached after Airbus managed to sell 10 of the A320neo aircraft from the Norwegian order to a different customer.  

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