April 29, 2020 / 10:06 PM / a month ago

Norwegian Air makes final offer to bondholders ahead of rescue plan vote

OSLO (Reuters) - Norwegian Air (NWC.OL) made a last-ditch attempt on Thursday to win support from bondholders for its rescue plan by improving the conditions of a debt swap, minutes before a meeting to vote on the deal was due to take place.

FILE PHOTO: A Norwegian Air plane is refuelled at Oslo Gardermoen airport, Norway November 7, 2019. Picture taken November 7, 2019. REUTERS/Lefteris Karagiannopoulos

Bondholders were set to start a meeting at 1400 GMT to vote on the airline’s debt-to-equity plan, the first major test of the budget carrier’s rescue efforts amid the coronavirus outbreak.

The revised offer was released at 1359 GMT and the deadline to accept it will now be held open until 2100 GMT.

Among other things, Norwegian Air now proposes to give bondholders the right to receive preferred allocations should it launch a public equity offering, and a shortened lock-up time before any shares received in the conversion can be sold.

“This is the company’s final offer,” it said in a statement.

The carrier may run out of cash by mid-May unless its plan, involving a swap of up to $1.2 billion worth of debt into equity and which hands over most of the ownership to the firm’s lessors and bondholders, is approved by creditors and shareholders.

If the company wins backing from bondholders, it needs to win support of leasing companies by Sunday, and for shareholders to vote on the proposal at an extraordinary general meeting on Monday.

If successful, the plan would allow Norwegian to tap government guarantees of up to 2.7 billion crowns ($260 million), which hinge on a reduction in its ratio of debt to equity, on top of 300 million crowns it has already received.

Norwegian Air warned on April 27 that taking the company through an alternative route of bankruptcy proceedings in Norway would destroy much of the value left in the firm and that most creditors would likely recover little of their claims.

Ahead of Thursday’s vote, some bondholders had said they would vote in favour of the plan.

PIONEER

Norwegian grew rapidly in the last decade to become Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major U.S. cities, but it also accumulated debt and liabilities of close to $8 billion.

Before the novel coronavirus outbreak all but shut down air traffic due to government-imposed travel restrictions, the airline had taken steps to cut costs and routes, aiming to make a full-year profit for the first time in four years.

Currently only paying invoices vital to its minimum operations, such as salaries for staff still employed and critical IT infrastructure, Norwegian has put payments for ground handling, debt and leases on hold.

It is yet to announce the conversion price at which the swap would take place. There will be four separate votes - one for each of the four bonds proposed to be converted into equity.

The airline also aims to raise 400 million crowns from selling new shares.

Editing by David Evans and Mark Potter

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