Following the announcement of new shareholders in a restructuring plan that will result in the delisting of the firm and the erasure of current ownership positions, shares of Scandinavian Airlines fell more than 90% on Wednesday.
Late on Tuesday, the rescue plan combining the airline alliance Air France-KLM and the private equity firms Castlelake and Lind Invest—which joined the Danish government as investors—was unveiled.
SAS will get $700 million in convertible debt and $475 million in new stock as a result of the agreement. In the second quarter of 2024, Scandinavian Airlines will be delisted from the stock market; there will be no payout to present shareholders.
Castlelake will overtake Air France-KLM as the largest stakeholder with a 32% interest in the company. 26% of the shares will be owned by the Danish government, the remaining shares will “most likely be distributed among and held by certain creditors who may receive a recovery in equity,” according to SAS, who also stated that Lind Invest will own an 8.6% stake.
On Wednesday, just after trading began at Nasdaq Nordic, which owns the majority of stock exchanges in the Nordic-Baltic region, SAS shares fell 96% before recovering to fall a further 84%.
“The SAS management has said quite clearly that these shares will lose all of their value. This has been the situation for more than a year, according to Jacob Pedersen, a Sydbank analyst.
The reason the share had not lost all of its value, according to investment economist Per Hansen, was that “as long as there is a pulse, there is hope,” he told Danish network TV2. Some people will always sit and predict whether the share will increase once again.
The investors and SAS still need to agree on the specifics and final documentation for the agreed transaction structure, according to a statement from the firm. As part of SAS’s Chapter 11 bankruptcy protection, the deal will also need to be approved, as stated.
Scandinavian Airlines declared bankruptcy in July 2022, claiming that it had “voluntarily filed for Chapter 11, a legal process for financial restructuring conducted under U.S. federal court supervision.” By doing so, it pushed off a civil lawsuit while the company restructured its finances.
As part of its SAS Forwards strategy, the airline’s chairman, Carsten Dilling, stated that “securing new capital is one of the key pillars” and that the new investment could “facilitate our emergence from the US Chapter 11 process.”
The agreement, according to the company’s CEO, Anko van der Werff, “shows that our new investors believe in SAS and our potential to remain at the forefront of the airline industry for years to come.”
Under the planned deal, the Swedish government’s interest will be eliminated. SAS claimed that current shareholders’ consent was not necessary. According to Norwegian network NRK, about 255,000 stockholders will be impacted.
Additionally, the airline will leave the Star Alliance and join Air France-KLM’s SkyTeam, which includes, among others, Aeroflot, Air France, Alitalia, Delta Air Lines, KLM Royal Dutch Airlines, and Korean Air.
Scandinavian Airlines, founded in 1946, operates hubs in Copenhagen, Oslo, and Stockholm and flies to both domestic and international locations. Sweden and Denmark’s governments have a portion of Scandinavian Airlines. Norway sold its interest in 2018, and the Swedish state had said it would not invest any additional funds.
