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Scandinavian airline SAS is wiping out existing shareholders as part of a rescue deal that involves bigger rival Air France-KLM and private equity firm Castlelake becoming new investors alongside the Danish state.
The long-struggling airline said on Tuesday that it would receive $475mn in new equity and $700mn in convertible debt as part of the deal, taking it off the stock exchange with no payment to current shareholders and little to bondholders.
Castlelake will become the biggest shareholder with a 32 per cent stake as well as a majority owner of the convertible debt. Air France-KLM would own 20 per cent, while the Danish government — the sole Scandinavian nation still invested in the airline — would own 26 per cent.
The Swedish government’s stake will be wiped out under the proposed deal, which SAS said did not need approval of existing shareholders.
The airline will move from its current Star Alliance group to Air France-KLM’s SkyTeam as part of a transaction that it hopes will finally take it out of Chapter 11 bankruptcy protection after more than a year.
“This is a significant achievement of our transformation plan, SAS Forward,” said chair Carsten Dilling. He added that securing new capital should help “facilitate our emergence from the US Chapter 11 process”.
Alex Irving, analyst at Bernstein, said SAS had missed out by not being part of a large network or global joint venture and so had been left as a “subscale airline”.
He added: “Following Air France’s own remarkable turnaround, can it work the same magic on another group long challenged by restrictive unions and with low margins?”
SAS has struggled for more than a decade with high costs and weak profitability and filed for bankruptcy protection last July in the US as it sought new owners after the Covid-19 pandemic and subsequent stop in much of global travel pushed it over the edge.
The Norwegian government had already sold out of SAS and the Swedish state indicated it would put in no fresh money, leaving Denmark alone of the three countries that founded the airline in 1946.
The latest deal in the airline industry shows how legacy carriers in Europe are consolidating around three players: Franco-Dutch Air France-KLM, Germany’s Lufthansa and Anglo-Spanish IAG.
The traditional airline industry has struggled to fight off the threat of low-cost airlines such as Ryanair, Wizz Air and in SAS’s own backyard Norwegian Air.
The latter came out of bankruptcy protection two years ago, after trying to crack the lucrative transatlantic market before throwing in the towel.
Benjamin Smith, chief executive of Air France-KLM, which paid $145mn for its stake and some convertible debt, said: “Air France-KLM looks forward to establishing strong commercial ties with SAS.
“With its well-established position in Scandinavia and strong brand, SAS offers tremendous potential to Air France-KLM.”
Hybrid bondholders in SAS should expect a “modest recovery”, the airline said, while unsecured creditors would receive between 5 per cent and 20 per cent of the nominal value of their claims.
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