Hard times for Norwegian
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Another EGM and Rights Issue on the way, 17th December, with a 100:1 reverse share split.
The Board of Directors of Norwegian Air Shuttle ASA ("Norwegian" or the "Company") is today proposing a plan and set of actions that secures current and future travelers and ultimately will potentially enable the company to exit its current Irish Examinership process through implementations that aim to right-size the company operations at a level of proven profitability. This will mainly be done by reducing the fleet of aircraft, and therethrough reconstruct a balance sheet that is focused and strong enough to attract new investors and stakeholders including potentially Norwegian government support. The debt to equity conversion will not only include parts or whole of aircraft financing or leasing liabilities, vendor/supplier liabilities, bond obligations but potentially also include arrangements that requires Norwegian only to pay for aircraft when in use until 2022 (so called «PBH» Power by the hour). An equity issue up to NOK 4 billion in the form of common stock and/or hybrid equity instruments to current, new shareholders and other potential stakeholders is viewed as the final step in this process. It is the intention that should all these actions be successful, current shareholders will together with the current debtors become meaningful minority shareholders of the company. An extraordinary general meeting will be held 17 December 2020.
https://live.euronext.com/en/node/3471073
Reduction of the share capital
The Board of Directors of Norwegian Air Shuttle ASA ("Norwegian" or the "Company") is today proposing a plan and set of actions that secures current and future travelers and ultimately will potentially enable the company to exit its current Irish Examinership process through implementations that aim to right-size the company operations at a level of proven profitability. This will mainly be done by reducing the fleet of aircraft, and therethrough reconstruct a balance sheet that is focused and strong enough to attract new investors and stakeholders including potentially Norwegian government support. The debt to equity conversion will not only include parts or whole of aircraft financing or leasing liabilities, vendor/supplier liabilities, bond obligations but potentially also include arrangements that requires Norwegian only to pay for aircraft when in use until 2022 (so called «PBH» Power by the hour). An equity issue up to NOK 4 billion in the form of common stock and/or hybrid equity instruments to current, new shareholders and other potential stakeholders is viewed as the final step in this process. It is the intention that should all these actions be successful, current shareholders will together with the current debtors become meaningful minority shareholders of the company. An extraordinary general meeting will be held 17 December 2020.
https://live.euronext.com/en/node/3471073
Reduction of the share capital
- The share capital is reduced by NOK 3,696,878,720.70 from NOK 3,700,579,300 to NOK 3,700,579.30 by reducing the nominal value of each share. The reduction amount shall be transferred to funds and constitute other paid-up up equity. § 3 of the articles of association shall be amended to state the company's share capital and number of shares following the reduction in the share capital. [Comment: If the share capital is increased prior to the general meeting, the reduction amount will be amended so that it is equal to 99.9 % of the share capital at the date of the general meeting.
- https://www.norwegian.com/globalasse...huttle-asa.pdf
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Almost identical proposal to the last "debt for equity swap"
Aercap, BOC, and Other major creditors will not be interested in having equity in a company they have just dumped shares in at a huge loss. "State Aid" would only support the home market section of the company, and the PBH will not attract the leasing companies with 80% of the fleet permanently grounded, this PBH arrangement is already in place, so no change "Meaningful shareholders" in a slimmed down company through share reduction is smoke and mirrors, what they need is solid cash investment. A 99% reduction in shares is basically asking companies to write off their debts...Again, There is a limit to how long creditors can show good will, the sizeable creditors have already obtained High Court Judgements in the Uk and to think they are not serious about their intentions is once again burying the head in the sand. Basically, there is no market confidence in this company anymore. Let's see if anyone comes forward with investment before the 7th..
One must remember, the primary point of examinership is to protect jobs in a potentially viable company, but with possible job losses on this scale it is questionable "protection" and may appear to simply be an asset protection plan.
"Right sizing" is vacuous management bull, In April the board were told "right size" was a projection of 30% fleet reduction to 110/120 A/C , that proved impossible to support and the operation "right size" dwindled to 6 Aircraft all ex Norway. As demand stands now, the "right-size" allowing for home market and some international to Spain would not be far off the 21 A/C, all short haul they targeted to operate later part of this summer, even that number is contingent on major investment.
Aercap, BOC, and Other major creditors will not be interested in having equity in a company they have just dumped shares in at a huge loss. "State Aid" would only support the home market section of the company, and the PBH will not attract the leasing companies with 80% of the fleet permanently grounded, this PBH arrangement is already in place, so no change "Meaningful shareholders" in a slimmed down company through share reduction is smoke and mirrors, what they need is solid cash investment. A 99% reduction in shares is basically asking companies to write off their debts...Again, There is a limit to how long creditors can show good will, the sizeable creditors have already obtained High Court Judgements in the Uk and to think they are not serious about their intentions is once again burying the head in the sand. Basically, there is no market confidence in this company anymore. Let's see if anyone comes forward with investment before the 7th..
One must remember, the primary point of examinership is to protect jobs in a potentially viable company, but with possible job losses on this scale it is questionable "protection" and may appear to simply be an asset protection plan.
"Right sizing" is vacuous management bull, In April the board were told "right size" was a projection of 30% fleet reduction to 110/120 A/C , that proved impossible to support and the operation "right size" dwindled to 6 Aircraft all ex Norway. As demand stands now, the "right-size" allowing for home market and some international to Spain would not be far off the 21 A/C, all short haul they targeted to operate later part of this summer, even that number is contingent on major investment.
Last edited by Kirks gusset; 4th Dec 2020 at 09:09.
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Your statement assumes that
A. if they pull the plug the creditors can recoup their debt
B. If the leasing companies pull the aircraft they can find another airline to take them
Both assumptions are no correct in my view. The creditors calculation is wether it is better to bankrupt the company and get 10 cents on the dollar or keep it going and get 50 cents on the dollar but in shares. Each creditor will have their own view on that but there are arguments both ways. In any case the Irish court can force creditors to take a hair cut against their will. That is one of the main differences between a voluntary re-structuring and the Examinership process.
The lease companies don't want the aircraft back (yet). Better to be paid in shares and have the aircraft maintained and stored at Norwegian´s expense than being paid nothing and having to store them and maintain them yourself. Most leasing companies are not really geared up to look after the physical assets.
The 99% reduction is just a technical resizing that does not change the total value of shares held. It is done to avoid having shares trade at very low values.
Whatever the financial wizardry fresh new cash will need to be found in order to survive. Wether that happens depends on how much debt is written off, the soundness of the business plan against the evolution of the economy (ie Covid) and how much fresh equity is given for the investment. We know there is money in flying people on holiday from Scandi to the Med in a 737 so that part is probably worth someone investing. Is there money in flying to NY for 150 bucks in a 787? with a despatch reliability of 50%? how long will it take for that reliability to be 99%? will someone invest in that? how far is the break even point? who knows
A. if they pull the plug the creditors can recoup their debt
B. If the leasing companies pull the aircraft they can find another airline to take them
Both assumptions are no correct in my view. The creditors calculation is wether it is better to bankrupt the company and get 10 cents on the dollar or keep it going and get 50 cents on the dollar but in shares. Each creditor will have their own view on that but there are arguments both ways. In any case the Irish court can force creditors to take a hair cut against their will. That is one of the main differences between a voluntary re-structuring and the Examinership process.
The lease companies don't want the aircraft back (yet). Better to be paid in shares and have the aircraft maintained and stored at Norwegian´s expense than being paid nothing and having to store them and maintain them yourself. Most leasing companies are not really geared up to look after the physical assets.
The 99% reduction is just a technical resizing that does not change the total value of shares held. It is done to avoid having shares trade at very low values.
Whatever the financial wizardry fresh new cash will need to be found in order to survive. Wether that happens depends on how much debt is written off, the soundness of the business plan against the evolution of the economy (ie Covid) and how much fresh equity is given for the investment. We know there is money in flying people on holiday from Scandi to the Med in a 737 so that part is probably worth someone investing. Is there money in flying to NY for 150 bucks in a 787? with a despatch reliability of 50%? how long will it take for that reliability to be 99%? will someone invest in that? how far is the break even point? who knows
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Debt for shares...
How far do they think they can pull this stunt?
They have stopped refunding tickets simply because they can’t afford to pay their customers. Now they want customers to convert the outstanding debt into cashpoints. Which are pretty much worthless. Then they can convert these cashpoints into shares. They seem to think everything can be solved by issuing more shares.
Nice way to try to dump billions of debt in the lap of everybody else.
Time to put this rotten corpse in the ground.
How far do they think they can pull this stunt?
They have stopped refunding tickets simply because they can’t afford to pay their customers. Now they want customers to convert the outstanding debt into cashpoints. Which are pretty much worthless. Then they can convert these cashpoints into shares. They seem to think everything can be solved by issuing more shares.
Nice way to try to dump billions of debt in the lap of everybody else.
Time to put this rotten corpse in the ground.
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calypso
Broadly correct, however, the large creditors already have a judgement which means they would get some chance of picking at the the bones if the plug was pulled, having said that, with such a huge mountain of debt its about 1 cent in the dollar. The exchanging debt for shares only works if the companies supporting the debt are happy to keep effectively writing off the debts as the shares now only worth less than 10% of the debt they were exchanged for.
Regarding AC maintenance at Norwegians costs.. this is not happening, the maintenance fees are also being accrued as balance book debt (agreed at bail out), so effectively the leaseholders are paying to maintain their own assets, aged debt is driving share prices down, which is why they want them back and the compensation judged in their favour.
If 400M were invested now it would only wipe the slate off the aged debt since May and a day later the airline would be cash strapped again.
The real issue on agreement will be getting the lease holders to accept shares and also take their aircraft away as part of the "right sizing", all the 787 would need to go and the majority of the 738s, leaving about 20 A/C in service. This is a big ask of the lease holders that had no choice back in May, now they have a choice and some may just say sod it and not support the "new/old/same plan"
On the other hand, Lease holders may prefer to have their assets free to market, albeit the market is dead at the moment, and accept the deal on the basis they have already lost the money, what they won't want is A/C tied up on PBH contracts and history repeating itself.
With external investment and a 80% reduction in fleet and staff, the Company may survive, or at least be in a shape to be acquired by another player, unfortunately, the likes of Wizz are seizing this opportunity and chaos to expand rapidly into the traditional markets served by NAS and whilst nationalists may be loyal to a local company the travelling public just want the cheapest route from A to B
As of the 4th Dec they required a cash investment of 340M to keep operation going through this process.
To get an idea of the scale of the problems:
In May converted £1.5 Billion in debts to shares, also got £250M state aid, and agreement to convert £250m in PBH costs to shares/bonds.
In reality the debt conversion was not "cash" so it's fair to say the cash reserves plus the state aid and a dribble of revenue is what they've been operating off with heavily reduced crewing costs through government furlough support. The government support may last until March but the daily overheads have sucked all the reserves. Now they need £340M to see them through the next few months despite the CEO saying they could last until next spring through the Examinership process of 150 days.
It's understandable the Irish courts may want to ring fence the Irish assets, but without real cash injection approaching £1B they will only be protecting the brand and jobs in the home market.
Broadly correct, however, the large creditors already have a judgement which means they would get some chance of picking at the the bones if the plug was pulled, having said that, with such a huge mountain of debt its about 1 cent in the dollar. The exchanging debt for shares only works if the companies supporting the debt are happy to keep effectively writing off the debts as the shares now only worth less than 10% of the debt they were exchanged for.
Regarding AC maintenance at Norwegians costs.. this is not happening, the maintenance fees are also being accrued as balance book debt (agreed at bail out), so effectively the leaseholders are paying to maintain their own assets, aged debt is driving share prices down, which is why they want them back and the compensation judged in their favour.
If 400M were invested now it would only wipe the slate off the aged debt since May and a day later the airline would be cash strapped again.
The real issue on agreement will be getting the lease holders to accept shares and also take their aircraft away as part of the "right sizing", all the 787 would need to go and the majority of the 738s, leaving about 20 A/C in service. This is a big ask of the lease holders that had no choice back in May, now they have a choice and some may just say sod it and not support the "new/old/same plan"
On the other hand, Lease holders may prefer to have their assets free to market, albeit the market is dead at the moment, and accept the deal on the basis they have already lost the money, what they won't want is A/C tied up on PBH contracts and history repeating itself.
With external investment and a 80% reduction in fleet and staff, the Company may survive, or at least be in a shape to be acquired by another player, unfortunately, the likes of Wizz are seizing this opportunity and chaos to expand rapidly into the traditional markets served by NAS and whilst nationalists may be loyal to a local company the travelling public just want the cheapest route from A to B
As of the 4th Dec they required a cash investment of 340M to keep operation going through this process.
To get an idea of the scale of the problems:
In May converted £1.5 Billion in debts to shares, also got £250M state aid, and agreement to convert £250m in PBH costs to shares/bonds.
In reality the debt conversion was not "cash" so it's fair to say the cash reserves plus the state aid and a dribble of revenue is what they've been operating off with heavily reduced crewing costs through government furlough support. The government support may last until March but the daily overheads have sucked all the reserves. Now they need £340M to see them through the next few months despite the CEO saying they could last until next spring through the Examinership process of 150 days.
It's understandable the Irish courts may want to ring fence the Irish assets, but without real cash injection approaching £1B they will only be protecting the brand and jobs in the home market.
Last edited by Kirks gusset; 5th Dec 2020 at 15:58.
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Scandi and Spain are the only good things worth saving because that's where the money in SH is. Plenty of market and loyal custumers for the 90 738s + MAXs.
The rest is history. Let's hope for the best 🤞
The rest is history. Let's hope for the best 🤞
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There is no reason for failed Norwegian to exist. There are already more than enough airlines in Europe,most of them struggling to make a decent profit.
This company was never anything but a Ponzi scheme, Let’s get rid of it. There are other and better airlines out there.
This company was never anything but a Ponzi scheme, Let’s get rid of it. There are other and better airlines out there.