Norwegian Air sets big discount for share sale

OSLO: Norwegian Air will sell new shares at just a third of the current market price when the loss-making airline seeks to raise money from its owners in the next few weeks, it said yesterday.

Norwegian Air said on Jan. 29 it planned to raise 3 billion Norwegian crowns ($348 million) in a share sale to bolster its finances, just days after British

Airways owner IAG ruled out a bid for the budget airline.

Norwegian is trying to replicate on transatlantic flights the low-cost model that dominates the short-haul market via companies such as Ryanair and easyJet, but is struggling to make the business profitable. The European airline sector is struggling with over-capacity and high fuel costs, with several companies going out of business, the latest being British budget airline Flybmi, which filed for bankruptcy on Sunday.

In the rights issue, Norwegian’s shareholders will get two subscription rights to buy shares for every share they currently own, and new shares will be sold at 33 crowns each, compared with

Friday’s closing price of 97.34 crowns. By selling new shares far below the current market price, Norwegian will boost the value of each of the purchasing rights, which can in turn be bought and sold.

The company’s shares fell as much as 15 percent to a six-and-a-half year low of 83 crowns on Monday, before paring losses to trade down 8.8 percent at 88.8 crowns by 1300 GMT, valuing the business at about 4 billion crowns.

“Based on the (Friday) closing price, the theoretical value of each subscription right is NOK 21.45 and the theoretical value of the two subscription rights received per existing share is NOK 42.90,” Norwegian said in a statement. — Reuters