SAS AB secures milestone investment and new financing agreement amid restructuring

In a critical development for its financial restructuring, Scandinavian airline SAS AB has reached an investment agreement with a consortium led by Castlelake, alongside Air France-KLM, Lind Invest, and the Danish state. This new deal also introduces a USD 500 million DIP financing credit agreement by Castlelake, aimed at refinancing SAS’s current obligations and boosting liquidity. This agreement is pending approval from the U.S. Bankruptcy Court for the Southern District of New York.

Increased Consortium Investment Signals Confidence in SAS AB

Marking a bolstered commitment, the investor consortium has increased their proposed investment by USD 25 million, culminating in a substantial USD 1.2 billion funding for SAS AB. This financial injection consists of new equity and secured convertible debt, with the additional facility by Castlelake poised to refinance existing DIP financing terms.

SAS AB Navigates Chapter 11 With Strong Investor Support and Enhanced Liquidity. Photo courtesy of AS AB.

Strategic Financing to Propel SAS AB’s Restructuring Efforts

The new DIP financing is structured as a senior secured super-priority term loan, replacing an existing USD 700 million financing agreement. This strategic move is set to alleviate SAS AB’s financial strain by offering lower interest rates and the removal of certain fees. The terms also include a potential extension of the loan’s initial nine-month term.

SAS AB is on course to seek U.S. Court approval for the investment agreement and the new DIP financing in November 2023, as the company targets early 2024 for Chapter 11 Plan confirmation. The transaction is subject to regulatory nods and a subsequent Swedish company reorganization anticipated in 2024.

Anko van der Werff, President & CEO of SAS, has hailed the investment agreement as a pivotal moment in the airline’s SAS FORWARD plan, reinforcing investor confidence in the company’s sustainable future.

Outlook on SAS AB’s Shareholders and Creditors

The successful conclusion of SAS AB’s restructuring process will result in a reshaped shareholder structure, with new equity primarily distributed among the investor consortium and certain creditors. Expectations for creditor recoveries remain modest, with no anticipated returns for subordinated creditors and existing shareholders, as detailed in the October 3 press release.

This comprehensive deal is designed to secure SAS AB’s emergence from Chapter 11 proceedings, with existing common shares and listed bonds expected to be canceled and delisted in the second quarter of 2024. The airline’s steady progression through this restructuring milestone underscores its commitment to stabilizing operations and securing its position in the aviation market.