SAS has reached an agreement with creditors – but comes with a gloomy warning if the company does not reach an agreement with Sweden and Denmark

SAS writes in the report on Friday morning that it has had discussions with certain large holders of hybrid bonds worth a total of 1.5 billion Swedish kroner with floating interest rates, and the senior unsecured bond loans with fixed interest rates and duration until 2022 of 2.25 billion Swedish kroner .

SAS has agreed to adjust the terms for the conversion of the hybrid bonds into equities, and of the unsecured bond loans into hybrid bonds or equities.

However, SAS states in the report that discussions are still ongoing with the Swedish and Danish governments about the revised recapitalization plan, which the airline is working on after being hit hard by revenue falls during the corona crisis.

If this fails, SAS will not be able to repair the liquidity shortage as a result of the corona crisis and the negative equity will have a significant negative effect on the company’s financial position.

“Should SAS be forced to file for bankruptcy as a result of such a significant negative effect on the financial position, the holders of the existing hybrid bond loans and the unsecured bond loans will not be able to collect their bond receivables.”

“Bondholders’ big say can be expensive”

In a share comment, the head of equity analysis, Jacob Pedersen, of Danish Sydbank, writes that they maintain their recommendation to sell the share after the bondholders have negotiated significantly better terms.

He believes the agreement could be costly for both SAS and the shareholders – which also means the Swedish and Danish states.

– It will increase the pressure on SAS to repay the debt within the next few years. The new terms will weaken shareholders’ returns, SAS’s competitiveness and long-term survival opportunities, Pedersen writes.

Pedersen therefore believes that the major shareholders Denmark and Sweden must be skeptical of the proposed agreement, which must be approved by the shareholders.

This is the offer

The offer is that the owners of the hybrid bonds are proposed to be converted into shares in the company at 90 per cent of the values ​​of the hybrid bonds and at a subscription of NOK 1.16 per share. Previously, the offer was for 70.8 per cent conversion of the value and a subscription price of 1.89 Swedish kroner per share. More and cheaper shares will therefore be issued as a result of the change in the new proposal.

It is proposed that the bonds be converted to unsecured hybrid bonds with variable interest rates and perpetual maturity in the company to 100 per cent of the nominal amount. The bonds will thus not be converted into shares as previously proposed. According to Sydbank, the change will lower the number of new shares somewhat, but in return SAS will have to pay a high interest rate that will rise markedly over the next 11 years.

The company also reports that a further revision of the recapitalization plan is an increase in the interest rate by 0.9 percentage points per year for the new government hybrid bonds of SEK 6 billion to the Swedish and Danish governments. According to the analyst at Sydbank, this alone will lead to around SEK 50 million a year in extra interest costs.

The principle agreement described must, as mentioned, be approved by the creditors. In the agreement in principle, SAS has reached an agreement with owners who represent 51.42 per cent of the hybrid bonds and the owners who represent 39.56 per cent of the bonds.

SAS announces that they will soon announce further information about the revised plan and the implementation of the plan. As mentioned, the plan has been approved by the board of SAS, and the company further states that the plan must be approved by the European Commission and at an extraordinary general meeting.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other form of use of all or part of the content, can only take place after written permission or as permitted by law. For additional terms look here.

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