Landed the solution when it mattered the most

With almost every aircraft grounded, virtually no passengers and debts running to NOK 55 billion, the airline Norwegian was in dire straits in the spring of 2020. The solution involved – as the business daily Dagens Næringsliv phrased it – a mix of alchemy and Harry Potter. The airline was saved.

– Norwegian had just emerged from a restructuring and the outlook was promising, when the pandemic dealt it a knockout blow. There was no time to lose. We were working against the clock, says Richard Sjøqvist, BAHR Partner and Head of the firm’s Finance market group.

Like other airlines and travel industry companies, Norwegian took a hammering from the government restrictions introduced in response to covid-19. The airline approached the authorities already in February, with a warning that the situation might turn critical. Norwegian then had total debts of NOK 55 billion, of which NOK 33 billion were owed to aircraft leasing companies and NOK 21.9 billion were owed on aircraft owned by the airline itself. On 19 March, the Government of Norway launched an emergency package totalling NOK 6 billion, of which NOK 3 billion was earmarked for Norwegian. However, this did not in itself resolve the airline’s predicament. Norwegian and the BAHR team needed to get the backing of all stakeholders for a plan to comply with the requirements under the borrowing programme.

The airline got access to the first NOK 300 million of government funds through a combination of guarantees from DNB and Danske Bank. Norwegian thereafter needed to get interest and instalment relief, to enable a NOK 1.2 billion government guarantee to be furnished. The airline then had to strengthen its equity to gain access to the last NOK 1.5 billion.

BAHR Partner, and Head of the firm’s Finance market group, Richard Sjøqvist

There was no time to lose. We were working against the clock

The situation was complex and the negotiations challenging

Transparency and equal treatment

After intense negotiations with bondholders, leasing providers, banks, major suppliers and other creditors, the Shareholders’ Meeting of Norwegian was on 8 April invited to vote on the following proposed solution:

• Part of Norwegian’s debt to aircraft leasing companies, banks and other creditors to be converted into Norwegian shares. • Use of other financial instruments to convert other relevant debt into equity or equity instruments. • All or major parts of the company’s bond loan to be converted into Norwegian shares. • Completion of a subsequent private placement against cash consideration, with a potential preferential right for existing shareholders. The plan was adopted, and the company was able to proceed with its response to covid-19’s effects on the airline’s operations.

– We are delighted to have been able to assist with finding a solution. The key objective was, as always in a process like this, to preserve asset values, safeguard jobs and ensure continued operations and value added. The situation was complex and the negotiations challenging, but we appreciated that stakeholders acknowledged the seriousness of the situation and the limited room for manoeuvre. It was important for Norwegian and us to take a transparent approach and treat everyone equally. I believe that was the key to our success, concludes Sjøqvist.