Originally Posted by
racedo
As they are going for growth then not really surprising they have a cash issue, it is pretty normal when companys are growing quickly. Borrowing from a bank and they knowing you need the cash means they set the terms and if need to borrow $250 million then pretty much guaranteed they will be looking for $10-15 million in fees plus a high interest rate.
Borrowing from the shareholders is FREE aside from the fees and underwriting costs.
As they have someone underwriting it, it means they have the money either way. Underwriter is someone basically stating they will buy any shares issued that have not been taken up by existing shareholders for a fee. Company will have to restructure to stop the cash bleed.
Norwegian capitalism is slightly different from the vulture capitalism that exists in UK/US so they will be there for at least another year. Norwegian Govt see it as a strategic investment so would fully expect them via other means to support the company.
However they are not going for growth, they are trying to strengthen their balance sheet according to Bjorn Kjos. The type of capitalism doesn’t come into it. As I say, I wish no ill on the company or their employees, however trying to raise cash from a rights issue is the last resort to funding because they are unable to raise it elsewhere. In simple terms, they are not generating enough cash from their on going operations to cover what they need to cover and the banks won’t lend them any more money.
The underwriters would have judged that 3billion KR is what they require to survive the winter. Hopefully in summer, after their turn around plan has started, they will be able to generate cash from ongoing operations to cover them going forward.
Its reletivly simple however, no money is free. The underwriters/shareholders will want their investment back at some point plus a return on it. The only way the company is going to be able to provide that return is if it starts making a sizeable profit, soon. The underwriters obviously think that’s achievable and good on them too, I hope they are correct. However NAS is running out of options, it quickly needs to start to make a profit from flying people from A to B.