Scandinavian Airlines (SAS) received a major boost in its turnaround efforts as a U.S. bankruptcy court approved its restructuring plan, known as the “Chapter 11 Plan.”
This green light paves the way for SAS to emerge from financial difficulties and solidify its position in the competitive airline industry.
The court’s approval signifies a critical milestone for SAS’s comprehensive transformation plan, SAS FORWARD.
SAS designed this plan to tackle its financial challenges and propel the airline towards a more sustainable future.
Key Points of the Restructuring Plan
Court Approval
The U.S. Bankruptcy Court for the Southern District of New York has given its stamp of approval to the Chapter 11 Plan.
However, the plan still requires final sign-offs from regulatory authorities and the completion of a separate Swedish company reorganization process. SAS anticipates exiting Chapter 11 by the end of the first half of 2024.
Impact on Creditors and Shareholders
Unfortunately, existing shareholders won’t receive any value from the restructuring, and subordinated creditors are unlikely to see any recovery.
The restructuring process will result in the cancellation of all SAS AB’s common shares and listed commercial hybrid bonds.
Business Operations Remain Uninterrupted
A key point for passengers is that SAS’s flight schedule and overall operations will continue as usual throughout the restructuring process.
Travelers can book flights and expect their journeys to proceed without disruption.
Why Chapter 11?
SAS strategically utilized Chapter 11 proceedings to accelerate the implementation of its SAS FORWARD plan. This legal framework provided a platform for:
- Negotiating with Creditors: SAS successfully reached agreements with key stakeholders. This allows them to restructure their debt obligations and achieve a more manageable financial landscape.
- Fleet Optimization: The airline strategically reconfigured its aircraft fleet, amending lease agreements for 59 planes. These adjustments are expected to generate significant annual cost savings of at least 1 billion Swedish Krona (SEK). This comes through reduced aircraft lease expenses and cash flow improvements related to aircraft financing.
- Securing New Funding: A consortium of investors, including the Danish government, has emerged as the winning bidder for SAS’s restructuring plan. This consortium will provide a critical financial injection of $1.2 billion. It is comprised of $475 million in new unlisted equity and $725 million in secured convertible debt. This fresh capital will play a vital role in SAS’s financial recovery.
Looking Forward: A Financially Stronger SAS
The court’s approval marks a significant victory for the airline and its stakeholders. Anko van der Werff, President & Chief Executive Officer of SAS, expressed optimism, stating,
“This is a major milestone for SAS in our transformation plan, SAS FORWARD. The approved Chapter 11 Plan…sets a clear path to exiting the restructuring proceedings.”
A financially stronger foundation will empower the carrier to emerge as a more competitive airline with a stable equity structure.
The company acknowledged the contributions of its stakeholders, particularly its employees who have remained dedicated throughout this challenging period.
While there’s still work to be done, the airline has taken a powerful step towards realizing its full potential. The latest news builds hope that it will remain a leader in the airline industry for years to come.
Passengers can look forward to continued service from the carrier. They potentially stand to benefit from a more streamlined and financially secure Scandinavian Airlines in the future.
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