OSLO (Reuters) – Lessors including AerCap and BOC Aviation <2588.HK> are now the biggest shareholders in Norwegian Air <NWC.OL> after the budget carrier completed a debt restructuring and secured a long-sought credit guarantee from Norway’s government.
With most of its fleet grounded by coronavirus lockdowns, the company had said it would run out of cash in mid-May unless it accessed a 2.7 billion crown ($271 million) government aid package.
Bondholders, lessors and shareholders recently agreed to a 12.7 billion crowns debt conversion and share sale that boosted Norwegian’s equity, meeting a key aid condition.
Major lessor Aercap <AER.N> now holds a 15.9% stake after converting lease obligations into shares. BOC Aviation <2588.HK>, ultimately controlled by state-owned Bank of China, holds 12.67%. Lessors collectively took a majority of Norwegian’s capital as smaller firms including Avolon and DP Aircraft <DPAD.L> did similar deals.
Leasing firms said they reluctantly agreed to take shares for debt as Norwegian’s bankruptcy would have released a glut of used planes into the market, hurting the rest of their business.
“Lessors went with the least unpalatable option,” said a source close to one of the firms.
AerCap’s Chief Executive Aengus Kelly told investors this month the debt swap was an “extraordinarily rare” move that would only ever be considered in “very unusual circumstances”.
The recovery plan will see Norwegian operate seven aircraft for up to 12 months before building up to 110-120 planes in 2022, compared with almost 150 before the crisis.
“Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues,” the airline’s CEO Jacob Schram cautioned.
The debt conversion increases the number of shares at issue to 3 billion from just 163.6 million, diluting existing owners and driving down the share price.
The stock was down 23.3% to 2.90 crowns at 1131 GMT after hitting a record low of 1.50 crowns earlier in the session, still above the 1 crown share-issue price.
Norway’s aid package comes on top of an earlier 300 million-crown payout.
(This story restores dropped word, paragraph 6)
(Reporting by Terje Solsvik and Victoria Klesty; Additional reporting by Laurence Frost; Editing by Louise Heavens and Elaine Hardcastle)