SAS bridge financing keeps survival hopes airborne, shares climb

SAS Link’s Embraer E195 plane lands at Kastrup Airport, as Scandinavian Airlines pilots go on strike, in Kastrup, Denmark, July 4, 2022. TT News Agency/Johan Nilsson via REUTERS

STOCKHOLM, Aug 15 (Reuters) – Scandinavian airline SAS ( SAS.ST ) kept its bid for survival alive at the weekend by securing bridge financing through bankruptcy protection proceedings, sending its shares on Monday down 9% higher.

The airline, whose main owners are Sweden and Denmark, said on Sunday it had signed a deal with U.S. private equity firm Apollo Global Management ( APO.N ) to raise $700 million to finance its reorganization under US Chapter 11 bankruptcy protection proceedings. Read more

SAS applied for protection in July, a day after most of its pilots began a two-week crippling strike over collective bargaining agreements. SAS said the action could scare off lenders and could threaten their existence. Read more

SAS shares rose 9% in morning trade, taking their one-month gain to 26%. The stock is still down 62% in the past year.

“The price of being on the brink of bankruptcy is high, but the process is now starting and the hard work of getting billions in debt off the books can be accelerated and costs significantly reduced as well,” he said. say Sydbank analyst Jacob Pedersen.

“The reality remains that existing shareholders’ assets are gone and they are exposed to huge dilution when the capital increase takes place,” Pedersen said in a note to clients, reiterating a “sell” recommendation on shares of SAS.

SAS, which was loss-making before the pandemic due to growing competition from low-cost carriers, has said it needs to cut costs further and raise more capital to survive.

The Swedish government has rejected the request for more cash, but Denmark has said it could write off some of the debt and inject new funds if SAS finds backing from private sector investors.

A Danish finance ministry spokesman said on Monday that the government had noted the bridge financing deal and reiterated that its support for a rescue plan launched by SAS in February was conditional on the airline attracting new major shareholders.

Copenhagen also wants to retain influence over a number of decisions to ensure SAS maintains a strong presence at Danish airports, which it says is important for the small Nordic country’s economy and for maintaining good global travel connections.

Sydbank’s Pedersen said the Apollo deal suggested Apollo could become a major shareholder in SAS by converting the loan into equity at the end of the Chapter 11 process.

Reporting by Anna Ringstrom, Marie Mannes in Gdansk, Stine Jacobsen in Copenhagen; Editing by Edmund Blair

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