Government is optimistic about contributing money to Norwegian – E24

The case is being updated …

In the past two weeks, there has been a frenzied dialogue between Norwegian airline and the government in an attempt to get more emergency aid.

The company, like other airlines, has been hit hard by the crown and has filed for bankruptcy protection as they now attempt to succeed with the second rescue operation in less than a year.

In November, Norwegian received a blank rejection by the government for more helpBut on Thursday it’s clear that the company got the message they were hoping for:

– Norwegian’s new business plan involves heavy interventions in the company’s debt structure and an inflow of NOK 4-5 billion in fresh capital. The plan seems stronger than the one we said no to in October. That is why we are now confident to contribute, says Trade and Industry Minister Iselin Nybø in a press release.

Nybø does not say exactly how much the Norwegian state can contribute.

Will not become owner

Last spring, Norwegian received a first rescue package in which the state provided $ 3 billion in loan guarantees. During the summer, management made it clear that more capital and new measures were needed.

The airline recently unveiled a powerful new cure for horses, in which they asked the government to join in again.

In this plan Long-haul flights will be eliminated, more capital will be raised, and debt will be further reduced..

– If Norwegian is successful with this work, the government has said that we can contribute with a hybrid loan, says Minister of Commerce and Industry Nybø and continues:

– But it is a demanding process in which the company is in process, and Norwegian, among other things, depends on the incorporation of long-term strategic owners. The state has no ambitions to own Norwegian, Nybø says.

At the same time, the Minister for Transport and Communications argues that Norwegian may be important for Norwegian aviation in the future.

– The aim of the numerous government measures in aviation policy is to ensure a good flight offer and a strong Norwegian aviation market when we can again have the opportunity to travel after the pandemic. We believe that a rebuilt Norwegian can be a major player in Norwegian aviation in the future, says Transport Minister Knut Arild Hareide.

The government’s message comes just a few months after low-cost Hungarian giant Wizz Air entered the Norwegian domestic market, and it comes at the same time that Norwegian startup Flyr tries to establish itself.

Provide money – with terms

In an interview on Politisk kvarter on January 15, Secretary of State Lars Andreas Lunde from the Ministry of Commerce and Industry explained why they refused to help Norwegian when they knocked on the door last fall:

“Part of the high debt was the reason we said no in November,” Lunde said.

In January, Norwegian came again and knocked on the government door. This time there was an updated plan on the table and the airline offered two possible tools:

– There are two alternatives that the company has presented to us. One is to move to the property side and become a shareholder in the company. The second is hybrid capital, which means perpetual loans with favorable terms, Lunde said.

Now the government has chosen the latter. In addition to the Storting having to approve any support, the government has set several conditions, including:

• The company must have the required new capital of at least NOK 4.5 billion, mainly from institutional and strategic investors.
• Participation in a hybrid loan will be made on market conditions.
• It is a prerequisite that the company finally receives approval for a general restructuring plan within the framework presented by the company.

In its new plan, Norwegian itself has said it will raise between four and five billion in new capital, and the government’s terms are at least 4.5 billion.

The company has also said that they will reduce total debt to around 20 billion. It will be less than a third of the total debt of 66.8 billion at the end of October.

Total debt at the beginning of last year was $ 86.3 billion and the drop to $ 66.8 billion is mainly due to the first restructuring last spring.

Net interest-bearing debt was $ 48.5 billion at the end of October, down from $ 61.7 billion at the beginning of last year.

The sum is less because cash liabilities and non-interest-bearing debts, such as liabilities related to tickets sold, have been deducted.

P.S! Hybrid capital is also the instrument that SAS has used as part of its rescue package in which Sweden and Denmark contributed billions.

– Increase the chances of success

Norwegian writes in a press release that they are pleased that the government has decided to contribute to the financing of new capital for the company.

– On behalf of all Norwegians, I would like to thank the government. Norwegian is in a very demanding situation as a result of the pandemic. State involvement significantly increases the chances that we will be able to raise new capital and get through the rebuilding process, says CEO Jacob Schram, adding:

– We still have a great job ahead of us, but we take government support as income because we are on the right track.

Also, he says they have a lot of faith that they can attract investors and get through the rebuilding process.

– We have received a lot of support from political parties, from customers and employees, and from shareholders and business partners. We are very grateful for that and it means a lot to us at a demanding time. In addition, a government contribution helps to secure Norwegian jobs and healthy competition in aviation.

Norwegian offers a carrot to join

Since the government makes it clear that they will participate on the market terms, you can take a closer look at the terms that Norwegian has outlined in its second restructuring plan.

Here, existing shareholders are offered either to do nothing or to participate in a share issue in which they bring in around 400 million of fresh capital.

Those who say they don’t keep about five percent of the stake they had before the transaction, while those who participate with new money get a larger stake.

Given that last year the Norwegian state gave Norwegian three billion in loan guarantees, they fall into the group of creditors. Creditors are also offered the option of doing nothing or participating with new capital.

If they do nothing, their claims against Norwegian will turn into a hybrid loan that can be redeemed for shares that will give them about 25 percent ownership of the new company.

The alternative is to bring in new capital. Those who do so will sit in total with 70 percent of Norwegians.

Norwegian is adding a carrot here too, because creditors who are lining up with the money in the new hybrid loan will also have their old claims against Norwegian increased to 150 percent.

In doing so, creditors will recoup more of the money that the Irish court believes Norwegian owes them, if they put up more capital.