SAS Threatens Bondholders With Bankruptcy

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Scandinavian Airlines System (usually just referred to as SAS or Scandinavian Airlines), an airline minority-owned by Swedish and Danish governments, has threatened bondholders with a bankruptcy.

The airline is currently going through a restructuring (didn’t they do one couple of years back?) due to the Covid-19, and tries to reach an agreement with its bondholders and Swedish and Danish governments.

You can access SAS here.

Here’s an excerpt from the DN:

SAS has agreed to adjust the terms for the conversion of the hybrid bonds into equities, and of the unsecured bond loans into hybrid bonds or equities.

However, SAS states in the report that discussions are still ongoing with the Swedish and Danish governments about the revised recapitalization plan, which the airline is working on after being hit hard by revenue falls during the corona crisis.

If this fails, SAS will not be able to repair the liquidity shortage as a result of the corona crisis and the negative equity will have a significant negative effect on the company’s financial position.

“Should SAS be forced to file for bankruptcy as a result of such a significant negative effect on the financial position, the holders of the existing hybrid bond loans and the unsecured bond loans will not be able to collect their bond receivables.”

And here’s from Berlingske:

The warning came in a statement in which SAS announced an agreement which gives the owners of the company’s two bonds better terms and increases SAS ‘interest expenses compared to the original rescue plan, which the airline has previously presented.

But despite the better terms, there are still not enough bondholders who have nodded yes to the plan. While 80 percent and 66.6 percent, respectively, of the owners of the two bonds must support the plan, there was only support from 51.4 percent and 39.6 percent, respectively, on Friday.

In addition, SAS has had to offer the Danish and Swedish governments, which own 14 percent and 15 percent of the airline, higher interest rates on a so-called hybrid loan of six billion Swedish kroner.

Here’s a statement that SAS released on Friday: Download (PDF, 143KB) Conclusion

SAS was on the verge of collapse a few years ago but was saved at the last minute. If the airline cannot operate profitably even during the best of times, is it worth propping up now?

I would assume that SAS will reach an agreement with the bondholders and will get new loans from the Swedish and Danish governments (Norwegians have already bailed out). Not sure how they intend to pay them or is the plan to roll them over indefinitely?