SAS bridge financing keeps survival hopes airborne, shares climb

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The airline, whose biggest owners are Sweden and Denmark, said on Sunday it had signed a deal with U.S. private equity firm Apollo Global Management (NYSE:APO) for $700 million in financing to fund its reorganisation under U.S. Chapter 11 bankruptcy protection proceedings.

SAS filed for the protection in July, a day after most of its pilots launched a crippling two-week strike over collective agreements. SAS said the action could scare off lenders and could threaten its existence.

Shares in SAS were up 9% in morning trade, taking a one-month rise to 26%. The stock is still down 62% in the past year.

“The price of being on the brink of bankruptcy is high, but now the process is getting going, and the hard work of getting billions in debt dropped and also significantly reducing costs can be accelerated,” Sydbank analyst Jacob Pedersen said.

“The reality remains that existing shareholders’ assets are gone and that they are exposed to a big dilution when the capital increase is carried out,” Pedersen said in a note to clients, reiterating a “sell” recommendation for SAS shares.

SAS, which was loss-making before the pandemic due to rising competition from low-cost carriers, has said it needs to slash costs further and raise more capital to survive.

The Swedish government has rejected the plea for more cash but Denmark has said it might write off some debt and inject fresh funds if SAS found support from private-sector investors.

A Danish finance ministry spokesperson said on Monday the government had noted the bridge financing deal and repeated that its support for a rescue plan launched by SAS in February was conditional on the airline attracting new large shareholders.

Copenhagen also wants to maintain influence over a range of decisions to ensure SAS keeps a strong presence at Danish airports, something it says is important for the small Nordic country’s economy and to keep good global travel connections.

Sydbank’s Pedersen said the deal with Apollo suggested Apollo could become a major shareholder in SAS by converting the loan to equity at the end of the Chapter 11 process.

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