SAS has achieved a significant milestone in its ongoing Chapter 11 process within the United States. In this pivotal step, SAS has chosen a consortium led by Castlelake, representing certain funds or affiliates, Air France-KLM, Lind Invest and the Danish state (collectively referred to as the investors) as the winning bidder in its exit financing solicitation process.
The agreed-upon transaction structure encompasses a total investment of US$1,175 million (equivalent to SEK12.925 billion) in the reorganised SAS. This includes US$ 475 million (SEK5.225 billion) in new unlisted equity and US$700 million (SEK7.7 billion) in secured convertible debt. Additionally, Castlelake will provide US$500 million (SEK5.5 billion) for the refinancing of SAS’ existing debtor-in-possession (DIP) term loan. As part of this transaction, SAS intends to eventually transition from the Star Alliance to join the SkyTeam Alliance, of which Air France-KLM is a founding member, pending requisite approvals and its emergence from the Chapter 11 process.
While the details and final documentation for the agreed transaction structure are yet to be formalised between SAS and the investors, this transaction will also require approval as part of SAS’ Chapter 11 plan of reorganisation. The confirmation and implementation of the Chapter 11 plan are contingent on various conditions precedent, including approval by the U.S. Bankruptcy Court for the Southern District of New York (the U.S. Court), solicitation of votes on the Chapter 11 plan from specific creditors, endorsements from various regulatory bodies and the completion of a Swedish company re-organisation. No approval from the existing shareholders of SAS AB is anticipated for this transaction.
Throughout the implementation of this transaction, SAS will continue to operate and serve its customers without interruption. It is anticipated that SAS AB, the publicly listed parent company of the SAS group, will file for a company reorganisation in Sweden (Sw. företagsrekonstruktion) in 2024. As a result of this process, all common shares and listed commercial hybrid bonds of SAS AB are expected to be cancelled, redeemed and delisted, currently projected to occur during the second quarter of 2024. Consequently, existing shareholders in SAS AB are not expected to retain any value and only a modest recovery is anticipated for holders of commercial hybrid bonds.
In parallel with this transaction, following its entry into SkyTeam, SAS AB will seek to establish a commercial cooperation with Air France-KLM and its affiliated airlines, subject to customary approvals. This partnership aims to enhance connectivity and benefit Scandinavian customers.
The transaction structure agreed by SAS and the investors is expected to include, among other things and subject to final documentation, the following key features:
A total investment in the reorganized SAS corresponding to US$1,175 million (SEK12.925 billion), including US$475 million (SEK5.225 billion)in new unlisted equity and US$700 million (SEK7.7 billion) in secured convertible debt, which would result in a shareholder structure post-reorganization (based on total equity, but pre-conversion of the convertible debt) where:
Castlelake holds approximately 32.0% of the equity and 55.1% of the convertible debt;
The Danish State holds approximately 25.8% of the equity and 29.9% of the convertible debt;
Air France-KLM holds approximately 19.9% of the equity and 5.0% of the convertible debt;
Lind Invest holds approximately 8.6% of the equity and 10.0% of the convertible debt and the remaining approximately 13.6% of the equity is most likely to be distributed among and held by certain creditors who may receive recovery in equity. (£1.00 = US$1.22 / SEK13.38)