According to a stock exchange announcement at Oslo Børs (Oslo Stock Exchange), Scandinavian Airlines (SAS) has reached an agreement with its creditors who are major owners of bond loans, as part of its plans to handle the COVID-19 crisis.
The agreement is a major step towards SAS’s plan to survive the COVID-19 crisis and hopefully recover to see future profits.
Hybrid bonds converted to shares
With similarities to how Norwegian Air Shuttle structured its recovery plans by converting outstanding loans to shares, SAS has agreed on an emergency plan with its largest owners of bond loans.
Discussions were ongoing between SAS and creditors to convert hybrid bonds (bonds with debt as well as equity characteristics) into shares.
The major owners of two types of loans were approached for solutions to the SAS-debt:
- An unsecured bond loan of SEK 2.25 billion (USD 257.1 million), and
- A hybrid bond loan of SEK 1.5 billion (USD 171.4 million).
SAS reaches agreement with creditors
Under the agreement, the hybrid bonds will be converted into ordinary shares at a rate of 90% of its nominal value.
The price of the shares has been set at SEK 1.16 (USD .13) per share.
Early on in negotiations, the value of the conversion into shares was proposed at 70.8%, then 81.3% of the nominal value.
The bonds will be converted into hybrid bonds with a floating interest rate. The bonds will have a perpetual maturity to 100 percent of the nominal value.
What’s next before the SAS agreement with its creditors go into effect?
The agreement is technically proposals until approved at a bondholders’ meeting. However, the owners of 51.42% of the hybrid bond loan have already given their support.
Swedish and Danish governments
In the meantime, talks are continuing between SAS and the Swedish and the Danish governments on a revised crisis plan.
Scandinavian Airlines says discussions are now underway with the Swedish and Danish governments about the revision of its recapitalization plan. The discussions do not involve the Norwegian government, which sold its remaining stake in SAS in 2018.
SAS wants to increase the interest rate by 90 basis points per year for new government hybrid bonds in the amount of SEK 6 billion (USD 685.6 million).
“SAS will publish further information on the revised recapitalization plan and implementation schedule as soon as possible,”
Featured Image: SAS.
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