STOCKHOLM Reuters- Scandinavian airline SAS kept its bid for survival aloft over the weekend by securing bridge financing through bankruptcy protection proceedings and sending its shares 9% higher on Monday.
The airline's biggest owners are Sweden and Denmark, and the company said on Sunday it had signed a deal with private equity firm Apollo Global Management for $700 million in financing to fund its reorganization under U.S. Chapter 11 bankruptcy protection proceedings.
In July, SAS filed for protection after most of its pilots launched a crippling two-week strike over collective agreements. The action could scare off lenders and threaten its existence, according to SAS.
In the morning, the stakes in SAS went up 9%, taking a one-month rise to 26%. The stock is down 62% in the past year.
The price of being on the brink of bankruptcy is high but now the process is getting going, and the hard work of getting billions of debt dropped and also reducing costs can be accelerated, according to Jacob Pedersen, a Sydbank analyst.
Pedersen said in a note to clients that the existing shareholders' assets are gone and exposed to a lot of dilution when the capital increase is carried out.
SAS, which was loss-making before the pandemic due to rising competition from low-cost carriers, said it needed to slash costs and raise more capital to survive.
The Swedish government has rejected the plea for more cash, but Denmark has said it might write off some debt and inject fresh funds if SAS finds support from private sector investors.
A Danish finance ministry spokeswoman 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 large shareholders.
Copenhagen wants to maintain influence over a number of decisions to ensure SAS keeps a strong presence at Danish airports, something it says is important for the small Nordic country's economy and to keep good global travel connections.
Sydbank's Pedersen said the deal with Apollo suggested that Apollo could become a major shareholder in SAS by converting the loan to equity at the end of the Chapter 11 process.