Uddrag fra Danske Bank:
Company overview
Norwegian Air Shuttle (NAS) is Europe’s third-largest low-cost airline, with a diverse
route network mainly in Europe and a young fleet with an average age of below four
years. In recent years, the significant growth in capacity has affected costs and
margins negatively. Due to this and a highly leveraged balance sheet with pressure
on liquidity, NAS has changed its focus from growth to profitability and had downscaled
capacity significantly even before the outbreak of COVID-19.
Key credit considerations
COVID-19 broke out at a time when NAS was vulnerable due to its high leverage
and limited available cash and credit facilities. The Norwegian government has set
up a state aid package directed at NAS totalling NOK3bn – divided into three
tranches. The first tranche of NOK300m only had one condition – namely a 10%
risk participation by external commercial lenders. This has been obtained. The
second tranche is for of up to NOK1.2bn. This would be available if existing
creditors agree to a waiver of interest payments and deferral of principal payments
for three months. However, NAS has announced that this has not been possible to
obtain. In respect of the third tranche of NOK1.5bn, NAS is required to have an
equity ratio of at least 8% at the end of the last quarter before the outbreak of
COVID-19 (Q4 19) – which at the time was 4.8%.
NAS has announced that it aims to seek access to Tranche 2 and Tranche 3
simultaneously by converting debt to equity to meet the requirements of the
Norwegian state guarantee to get the full NOK3bn funding. This includes all forms
of debt (bond, leasing payment debt, banks and other creditors). NAS has stated
that it will engage in dialogue with creditors over the coming weeks. NAS intends
to hold an extraordinary general meeting on 4 May. To approve the proposed
conversion, bondholders representing at least two-thirds of the bonds must be
present in person or by proxy at each of the meetings for the individual bond issues
and vote in favour of the resolution. In order to have a quorum, at least 5/10 of the
voting bonds must be represented at the relevant bondholders’ meeting. If the
proposal is not adopted by the bondholders in a bond issue, the bond terms of that
bond issue will remain unchanged.
The CEO of Norwegian has stated that if NAS gets access to the full NOK3bn
funding the company can survive until June. However, for the secured bondholders
(NAS07 and NAS08), it is uncertain if it is more attractive to hold on to the secured
bonds or engage in the debt to equity conversion. If the grounding of the fleet drags
on, NAS would need more than the NOK3bn funding. The security consists of takeoff and landing rights at London Gatwick Airport. According to NAS, the security is
valued in excess of the nominal bond value for NAS07 and NAS08 of around
USD380m (third-party valuation) – however, this was before the outbreak of
COVID-19. Based on the Monarch default case in the UK, bondholders should be
able to enforce the security but legal risks exist. In the current situation for global
aviation, a recovery of around 40% seems reasonable based on recent slot deals
taking into account the negative COVID-19 impact – however, we underline that
this estimate is uncertain.
