Investors of the embattled carrier Norwegian Air have voted in favour of a plan which will see the airline convert its debt to equity in a bid to secure its future amid the COVID-19 crisis. The approval will also unlock the rest of a NOK 3bn (£230m) bailout package from the Norwegian government.
The additional state aid was dependant on Norwegian reducing its debt-to-equity ratio. Without the money, the carrier warned that it would run out of cash by mid-May.
The NOK 10bn (£770m) debt-for-equity swap will hand majority ownership to the airline’s creditors. The company’s lessors are expected to acquire 53.1% of the business while bond holders are due to receive 41.7% of the company. Existing shareholders will be left with 5.2% of the firm.
The plan also includes a public offering of up to NOK 400m. A statement from the firm to the Oslo Stock Exchange said that 95% of the investors voted in favour of the proposal at an extraordinary general meeting held on Monday (May 4).
In a further statement, the airline added: “With the conversion of more than NOK 10bn from debt to equity now, a successfully completion of the public offering and significant concessions on future lease costs in the range of $200m that will additionally be converted into equity, the company has laid a solid foundation for New Norwegian and a strong return to the skies once the COVID-19 situation improves.”
The low-cost carrier is currently in the “hibernation phase” of its restructuring programme. A planned recovery is forecast for the high season in 2021 and normal operations are expected to be resumed in 2022.
At the end of April, the company revealed “New Norwegian”, a clean-sheet approach to operating its business that will concentrate on “core profitability” and “aggressive cost focus”. Practical steps it will take to achieve this include a resizing of its fleet and a focus on profitable routes.
The COVID-19 pandemic and associated travel restrictions resulted in the cancellation of 85% of Norwegian’s flights by mid-March. Its fleet capacity is currently reduced by 95%, with only seven aircraft remaining in operation offering a reduced state-subsidised schedule in Norway.