Share-sale lifeline will ensure Norwegian Air survival
BUDGET airline Norwegian Air looks likely to live on in a very slimmed-down form after completing a cut-price share sale and winning bondholders’ backing for a refinancing, after the coronavirus crisis compounded the carrier’s financial problems.
Existing shareholders will see their stakes massively diluted by the rescue as it will increase the number of shares in the company to about 3.5 billion from just 163.6 million.
The airline’s shares initially plunged 51pc to 2.51 crowns on Monday before recovering to trade at 4.0 crowns, still down 22pc on the day.
The debt conversion and share sale will allow Norwegian Air to tap government guarantees of up to 2.7 billion crowns (€246.5m), which hinge on a reduction in leverage, in addition to 300 million crowns it has already received.
After governments worldwide gradually shut down air travel in March, Norwegian Air said it would run out of cash in mid-May unless it was able to tap government funds.
The plan to save it involves flying just seven aircraft for up to 12 months before a gradual build-up to 110-120 planes in 2022, down from a fleet size of almost 150 aircraft before the novel coronavirus crisis.
Depending on developments in demand, Norwegian Air’s build-up of services could start earlier than outlined in its main scenario, its management has said.
A pioneer in low-fare transatlantic air travel, Norwegian Air’s rapid expansion left it with some $8bn of debt at the end of 2019. Its transatlantic operation will maintain only its most profitable routes, the company said last month.
The deeply discounted sale of 400 million new shares, at just 1 Norwegian crown each, was about seven times oversubscribed, and the new stock can be traded from later this week, the budget carrier said yesterday.