Nearing the end of its financial restructuring process, SAS is facing a deal that will bring significant changes to its capital structure.
A consortium including Air France-KLM Group, investment firms Castlelake L.P., and Lind Invest ApS, will take a majority equity stake in the airline, together with the Danish state.
This operation will result in a total wipe-out of the airline’s current shareholders and a major haircut for bondholders. The company is also set to be delisted from the public markets, with new shares and convertible bonds being issued.
The investors’ consortium, which presented the winning bid as part of SAS’s exit financing solicitation process, has committed to invest $1.175 billion of fresh capital, of which 475 million corresponds to shares, with the remaining $700 million in the form of secured convertible bonds.
In addition, the presence of Air France-KLM in the consortium has important implications for the strategic future of the Scandinavian airline that extend well beyond the financial domain.
The French flag carrier will contribute $144 million to the operation, of which $109.5 will be in the form of equity and the remainder in convertible bonds. This will give Air France-KLM a 19.9% non-controlling stake in SAS, which is expected to exit Star Alliance and align commercially with its new shareholder.
This is quite a remarkable move, given that SAS is a founding member of Star Alliance and has been traditionally aligned more closely with the Lufthansa Group. The tie-up with SAS will provide Air France-KLM an opportunity to increase its presence, operationally and commercially, in the Nordic region.
In addition to Air France-KLM’s 19.9% stake, other major shareholders will be Castlelake, with 32%, the Danish State 25.8% and Lind Invest, with 8.6%. The remaining shares, around 13.6% of the total, will be held by various other creditors.