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SAS begins an equity offering

SAS Scandinavian Airlines (SK, Copenhagen Kastrup) has initiated an attempt to acquire equity financing while conceding that it will receive minimal compensation for obligations owed to existing creditors when it emerges from Chapter 11 bankruptcy proceedings in the United States.

The bankrupt airline announced on April 6 that it had begun “a process to solicit equity investment in the reorganized SAS” as part of the Chapter 11 proceedings, in which “potential investors can place bids to take a lead position or be paired with other investors in acquiring equity interests” in the airline.

SAS stated in late May 2022 that it required a new capital investment of SEK9.5 billion kronor (USD911 million). Nevertheless, it now states that the final amount raised “will be determined by the competitive equity issue process as well as the company’s continuous ability to create additional liquidity.” Flight operations will continue as usual throughout the investigation, it added.

However, given that it faces around SEK20 billion (USD1.92 billion) in claims, as well as the need for significant new equity capital, SAS stated that it “expects only modest recovery for general unsecured creditors and little or no recovery for subordinated unsecured creditors” upon exiting Chapter 11. Existing shareholders – the Swedish and Danish governments each control 21.8% of SAS – will receive nothing or very little value because they are paid in lower priority than creditors, according to the company.

SAS also provided updated financial predictions. Revenues are expected to return to pre-pandemic levels in the fiscal year ending December 31, 2024, and to reach around SEK58 billion (USD5.56 billion) in 2026, up from the SEK49 billion (USD4.7 billion) forecasted for that year last September. According to the amended predictions, the amount of liquidity in 2023 “is likely to significantly exceed” the previously expected 15%.

The airline stated that it had ended talks with lessors in January and had secured agreements with 15 of them, representing 59 aircraft. SAS stated that it has achieved yearly cost reductions of more than SEK1 billion (USD96 million) through revised leasing arrangements, savings that will be reflected in the company’s financial performance after it emerges from Chapter 11.

According to a separate legal notice filed on April 5, a hearing for the approval of the equity financing has been planned for the morning of April 19, and any objections to the motion must be expressed no later than 1600L (2000Z) on April 12.

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