Court approves $700m SAS financing
- IATA/ICAO code:
- Airline type:
- Full service carrier
- Copenhagen Airport, Oslo Gardermoen Airport, Stockholm Arlanda Airport
- Year of foundation:
- star alliance
- Air group:
- SAS Group
- Anko van der Werff
Scandinavian flag carrier SAS has officially secured the necessary funding to continue operations as it seeks to return to profitability. Scandinavian Airlines System, known as SAS, has been approved by the US Bankruptcy Court for the Southern District of New York for funding of $700 million (7.0 billion Swedish krona).
The terms of the Debtor in Possession (DIP) agreement are substantially similar to terms previously announced by SAS on August 14, 2022, with the financing credit agreement managed by Apollo Global Management. The airline filed for Chapter 11 bankruptcy in the United States earlier this year in a bid to continue operations while restructuring its debt.
DIP financing, which the courts have now approved, is a specialized type of bridge financing used in conjunction with revenue generated from SAS’s ongoing operations to allow the carrier to continue to meet its obligations throughout the Chapter 11 process. Anko van der Werff, Chairman and CEO of SAS, explained how the new influx of cash would help the airline move forward:
“With the Court’s approval of our DIP financing, we are making significant progress in our Chapter 11 process. The DIP financing agreement with Apollo followed a thorough and competitive process that we conducted to achieve the best outcome of funding for SAS, and we are delighted that the Court has approved it.”
“I want to thank our employees for their hard work and dedication, and our business partners for their support as we continue to move forward in this process.”
The funding will allow the carrier to continue its operations. Photo: Getty Images
The airline also recently announced that it carried almost two million passengers during the month of August.
The backstory and the bankruptcy process.
The Star Alliance carrier expects the bankruptcy process to take between nine and twelve months. Since the court has now approved the financing agreement, an initial amount of $350 million will soon be available for SAS to use for continued operations. The court said in its decision on Friday that it would soon issue an order approving funding for the DIP.
SAS announced in July that it had voluntarily filed for Chapter 11 bankruptcy protection in the United States. The well-established and flexible legal framework makes it possible to restructure companies operating in several jurisdictions. As SAS has significant operations in the United States, it was eligible for the process, designed to strike deals with critical stakeholders, restructure the company’s debt obligations and receive a capital injection.
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The legal decision is part of the carrier’s “SAS FORWARD” plan to raise new capital, reduce or convert more than SEK 20 billion ($1.87 billion) of debt into common stock and rationalize its fleet. The airline has already started the restructuring process after being informed that the Swedish and Norwegian governments would convert existing debt into equity instead of injecting more cash into the airline.
SAS asked last week to return ten planes to lessors to help reduce costs. The aircraft in question include three Airbus A320neos, three Airbus A330-300s, two Airbus A350-900s, one Airbus A321 and one Boeing 737-700.
The airline expects to complete the restructuring process within a year. Photo: Tom Boon | single flight
Other international carriers operating in the United States, including Avianca, LATAM, Aeromexico and Philippine Airlines, have also used the Chapter 11 bankruptcy process to restructure debt and raise capital for continued operations. SAS expects to complete its court-supervised process within a year. Avianca took a year and a half, while Aeromexico took nearly two years to emerge from the process.