Norwegian Air Survives For Now

Norwegian Air is having an extraordinary stockholder meeting in Oslo today where the current equity owners will be effectively wiped clean, and the bondholders will convert most of the old debt to equity and take over.

The airline reached an agreement with the majority of bondholders but is still working to win over the leasing companies that are owned $550M. Two-thirds of the current stock owners must approve the dilution of their holdings.

UPDATE: 95% of the shareholders have accepted the debt to equity conversion and Norwegian now has access to cash from the State of Norway.

Here's the announcement from Norwegian:

Reference is made to the stock exchange notice dated 8 April 2020 of an extraordinary general meeting ("the EGM") to be held in Norwegian Air Shuttle ASA ("the Company") today 4 May 2020 at 08.30 CEST. The Company has received strong support from both its bondholders and lessors, and the Board of Directors has therefore updated the proposed resolutions for the EGM to reflect these agreements and narrowed the potential outcomes for its shareholders.

Here's about the bond conversions:

Reference is made to the bondholders' meetings of the bonds issued by Norwegian Air Shuttle ASA ending on 1 May 2020.

The proposal to the bondholders received a robust support from the bondholders across all the four bond issues with a combined support of 76% of the votes. In NAS08, NAS09 and the CB, the proposal received the required support with 89%, 98% and 85% of the votes, respectively. The company has now reached an agreement (in writing) with the largest NAS07 bondholders which will provide an improvement on the NAS07 and NAS08 bondholders so that the post-conversion Bonds may be increased by up to 38% of the post-conversion bonds (compared to 20% earlier) based on valuations of the Gatwick slots as set out in the attached summons.

The company has discussed the changes with the ad-hoc group of CB bondholders which have expressed support to the adjustments. The company will get re-confirmation from the CB bondholders through written resolutions and/or meeting without changes to the terms as approved on 1 May 2020. For the avoidance of doubt, the NAS08 will get the same improvement as NAS07. No bondholder meeting will be summoned for NAS09. The new bondholders' meeting(s) will be held on 18 May 2020.

"Thanks to constructive dialogue and negotiations with the bondholders and other stakeholders, I am pleased to confirm that we have reached an agreement with the bondholders. Our main priority now is to reach an agreement with the lessors prior to the extraordinary general meeting on Monday May 4," said CEO Jacob Schram of Norwegian. "We are now one step closer to getting access to the state loan guarantees that are crucial to getting through this crisis."

Here's Norwegian's presentation:

It is likely that the only other option for the stockholders if they vote against the proposal, would be that their equity is entirely wiped off during bankruptcy. However little they may get out of this deal is greater than zero.

Do the leasing companies have other options? The market for planes is distressed right now, and likely there won't be any takers in the immediate future.

I am still not convinced looking at the Norwegian's plan (read more here) that the cash from the Norwegian government is enough for anything else than seeing the airline through next Spring when, according to the plan, the airline would restart its operations.

I certainly hope that the airline survives and continues to fly transatlantic, providing much-needed competition against alliances and joint ventures that try to set the fares.