Norwegian, the low-cost long-haul carrier, has finally seen some light at the end of the tunnel, as the company announced that it has successfully obtained the state loan guarantee and managed to convert its debt into equity.
The state loan guarantee, worth $300 million (NOK3 billion) required Norwegian to improve its debt-to-equity ratio to 8%. The Norwegian government approved the loan on May 20, 2020, indicated the airline. Previously, the company warned that it could run out of cash by mid-May if it did not receive any additional liquidity.
On April 20, 2020, Norwegian’s cabin crew and pilot subsidiaries in Denmark and Sweden were forced to declare bankruptcy, a decision enforced by “lack of significant financial support from the Swedish and Danish governments.” Seemingly, the airline was set to follow a similar fate if it did not meet the requirements laid out by the Norwegian government.
Furthermore, the low-cost carrier converted $1.2 billion (NOK12.7 billion) of debt into equity, further improving its liquidity. The company converted lease obligations and bond debt into equity by converting them into conversion shares.
But the remaining months will remain “challenging,” according to Norwegian. The chief executive officer of the airline, Jacob Schram, stated that the “months ahead will remain challenging and with a high degree uncertainty for the industry.”
“Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues,” added Schram.
The company will undergo a restructuring process, calling the post-corona airline New Norwegian. The low-cost carrier will withdraw from many markets and will focus on services from its home market, Scandinavia. A reduced fleet and focus on proven routes will be the main strategy of the airline going forward, as it tries to build a sustainable and profitable airline.