Since July 5, the company, very seriously affected by the consequences of the health crisis and in a very delicate financial situation, had placed itself under the protection of Chapter 11 of the American bankruptcy law to restructure itself. The airline group is joining forces with the Castlelake investment fund which will take 32% of the Scandinavian company.
We were expecting news of consolidation in European air transport from TAP Air Portugal, it is first from SAS that things are becoming clearer. Indeed, the board of directors of SAS announced on October 3 that the consortium formed by Air France-KLM, the Castlelake investment fund, and Lind Invest ApS had been designated in the recapitalization process of the Scandinavian company in research new partners.
The participation of the Danish State reduced to 26% of the capital of SAS
Air France-KLM’s investment would represent a total of $144.5 million, of which $109.5 million would be invested in common shares and $35 million in secured convertible bonds. Following the transaction, Air France-KLM would hold a maximum minority stake of 19.9% in the share capital of SAS AB. According to the Reuters agency, another share of around 32% would be allocated to the Castlelake investment fund, and a share of 8.6% of the capital would be allocated to the Danish investment company Lind Invest ApS. The Danish State would therefore only keep a 26% share in the capital of SAS. In the event of authorization and the lifting of all other conditions precedent (including obtaining regulatory authorizations and the cancellation of all existing actions of SAS AB), the consortium gathered around Air France-KLM and the State Danish investors would invest a total of more than US$1.17 billion, including US$475 million in common shares and US$700 million in secured convertible bonds.
The finalization of the marriage is still long
The consortium’s investment proposal remains to be finalized and is subject to certain conditions precedent and regulatory approval, including in particular the approval of the European Commission, the American court responsible for supervising the reorganization under Chapter 11 and, with regard to SAS AB, from the Swedish court. Concurrently with the transaction, and subject to the satisfaction of certain conditions, including in particular the exit of SAS AB from Star Alliance, Air France-KLM intends to establish commercial cooperation between its airlines and SAS AB. In doing so, Air France-KLM would improve its presence in Scandinavian markets, where the SAS brand and its loyalty program are well established. Such commercial cooperation would benefit Scandinavian customers through increased connectivity and wider access to Air France-KLM’s global network.
SAS, hit hard by the global air transport crisis
This important phase of consolidation which is beginning for SAS is the result of the very significant financial impact that the Scandinavian company has had to suffer due to the health crisis linked to Covid-19. In 2020, the Scandinavian company had to let go of 40% of its staff and benefited from a recapitalization of more than 1 billion euros from the Danish and Swedish states. The Norwegian government, for its part, granted it a loan of 153 million dollars. In February 2022, SAS launched a new restructuring plan but the government refused to reinject new money into the company and the Swedish government even announced that it wanted to leave the company’s shareholding in the long term. In July 2022, a new drastic savings plan led to the launch of a pilot strike which caused the cancellation of 60% of the company’s flights. On July 5, SAS, in a critical financial situation, decided to place itself under the protection of Chapter 11 of the American bankruptcy law (the equivalent of our judicial recovery procedure) to be able to continue operating its flights while restructuring.
