SAS to Receive $1.18 Billion Investment to Avoid Bankruptcy

Stockholm–SAS is on the brink of bankruptcy but is set to be saved by an investor group led by Castlelake. The group plans to inject over $1 billion into the struggling Scandinavian airline, ensuring its survival.

Under the deal, the investor group will acquire majority control of SAS by investing a total of $1.18 billion. This move will result in existing shareholders being wiped out and marks the end of SAS’s 22-year tenure as a publicly listed company.

The investor group will hold approximately 86% of the airline, with Castlelake, a U.S. investment firm, taking a 32% stake. The Danish state will increase its stake from 21.8% to 25.8%, followed by Air France-KLM with 19.9% and Lind Invest with 8.6%.

SAS Chairman Carsten Dilling expressed his satisfaction with the deal, saying, “This is a significant achievement of our transformation plan. 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 U.S. chapter 11 process.”

Like many airlines, SAS has been severely impacted by the Covid-19 pandemic. The company suffered a sharp decline in revenue, depletion of cash reserves, and an increase in debt. Additionally, SAS faced intense competition from low-cost carriers, exacerbating its financial woes. To address these challenges, SAS launched a restructuring plan last year.

The aim of the restructuring plan was to comprehensively adjust the company’s cost base and reduce annual expenses by SEK7.5 billion. Simultaneously, SAS sought to cut or convert SEK20 billion of debt and raise capital. However, shortly after launching the plan, around 1,000 SAS pilots went on strike, worsening the airline’s financial situation and leading to the filing of Chapter 11 bankruptcy.

Operating under Chapter 11, SAS has been negotiating with stakeholders while striving to accelerate the implementation of comprehensive measures to overcome its financial difficulties.

SAS Secures Deal for Financial Restructuring

SAS, the Scandinavian airline, has recently secured a substantial financial deal for its ongoing restructuring. This agreement involves a significant injection of much-needed funds, as well as the refinancing of existing debt.

The deal, which was finalized on Tuesday, includes a cash injection of $475 million in new unlisted equity. Additionally, there will be $700 million in secured convertible debt and $500 million in refinancing by Castlelake.

As part of this agreement, existing shareholders will no longer hold any value in the company. SAS plans to delist its shares from the stock market during the second quarter of next year. The holders of commercial hybrid bonds can expect only a modest recovery on their debt.

Prior to this agreement, the governments of Sweden and Denmark had significant stakes in SAS, each holding 21.8%. However, after Tuesday’s deal, both countries will see a change in their positions. Denmark previously expressed a willingness to inject fresh funds and write off debts, but only if other investors contributed and the government maintained influence in SAS. Denmark has a keen interest in maintaining the Copenhagen Airport’s status as SAS’s largest hub and key transit route.

On the other hand, Sweden rejected the plea for more cash and instead supported converting its debt into equity. As Sweden is not part of the new investor consortium, it will no longer be a shareholder in the airline.

SAS also announced its intention to eventually join the SkyTeam Alliance, of which Air France-KLM is a founding member. This move would require relevant approvals and emerging from the Chapter 11 process. However, before any final decisions can be made, necessary approvals and completion of the Chapter 11 process are still pending.

The details and final documentation for this agreed transaction structure are yet to be finalized.