SAS has reached a major milestone in its ongoing chapter 11 process in the U.S.
and has selected Castlelake, L.P., on behalf of certain funds or affiliates
("Castlelake"), Air France-KLM S.A. ("Air France-KLM") and Lind Invest ApS
("Lind Invest"), together with the Danish state (collectively, the "Investors")
as the winning bidder consortium in its exit financing solicitation process. The
agreed transaction structure includes a total investment in the reorganized SAS
corresponding to USD 1,175 million (SEK 12.925 billion[1]), including USD 475
million (SEK 5.225 billion) in new unlisted equity and USD 700 million
(SEK 7.7 billion) in secured convertible debt, as well as a USD 500 million (SEK
5.5 billion) refinancing by Castlelake of SAS' current debtor-in-possession
("DIP") term loan. As part of the transaction, SAS is intended to eventually
join the SkyTeam Alliance ("SkyTeam"), of which Air France-KLM is a founding
member, and exit the Star Alliance, subject to any relevant approvals and
emergence from the chapter 11 process.
The details and final documentation for the agreed transaction structure remain
to be finalized between the Investors and SAS. The transaction will also need to
be approved as part of SAS' chapter 11 plan of reorganization (the "Chapter 11
Plan"). The confirmation and effectiveness of the Chapter 11 Plan remain subject
to various conditions precedent, including approval by the U.S. Bankruptcy Court
for the Southern District of New York (the "U.S. Court"), which will require the
solicitation of votes on the Chapter 11 Plan from certain creditors, approvals
from various regulatory authorities and the completion of a Swedish company
reorganization (as described below). No approval is expected to be required from
the existing shareholders of SAS AB for the transaction.
SAS will continue to operate and serve its customers as usual throughout the
implementation of the transaction, which is likely to entail a filing by SAS AB
(i.e., the listed parent company for the SAS group) for a company reorganization
in Sweden (Sw. företagsrekonstruktion) (the "Swedish Reorganization") in 2024.
As a result of that process, all of SAS AB's common shares and listed commercial
hybrid bonds are expected to be cancelled, redeemed and delisted (currently
expected to occur during the second quarter of 2024). Consequently, no value is
expected for existing shareholders in SAS AB and only a modest recovery is
expected for the holders of commercial hybrid bonds.
In parallel to the transaction, and further to its joining of SkyTeam, SAS AB
will seek to establish a commercial cooperation with Air France-KLM and its
airlines (subject to customary approvals), to the benefit of Scandinavian
customers through increased connectivity.
Carsten Dilling, Chairman of the Board of SAS, says:
"This is a significant achievement of our transformation plan, SAS FORWARD. We
have carried out a broad, competitive and thoroughly evaluated equity
solicitation process, and we are confident that the selected bid is the most
favourable for SAS, its creditors and other stakeholders. Securing new capital
is one of the key pillars in the SAS FORWARD plan and will provide a strong
financial foundation to help drive our airline forward and facilitate our
emergence from the U.S. chapter 11 process. While there is still work remaining,
I am pleased to see the great progress we are making to be a competitive and
financially strong company."
Anko van der Werff, President & Chief Executive Officer of SAS, says:
"The agreed investment is a key milestone in our SAS FORWARD plan, and it shows
that our new investors believe in SAS and our potential to remain at the
forefront of the airline industry for years to come. Further, our move towards a
partnership with SkyTeam determines a clear path forward for the company.
Through the completion of this process and the opportunities presented by being
part of SkyTeam, we will be able to further enhance SAS' offerings for the
benefit of our colleagues, customers and communities. We look forward to
building a bright future for SAS together."
Joe McConnell, Partner and Deputy Co-Chief Investment Officer of Castlelake,
says:
"Castlelake is pleased to lead this investment in SAS' future through a tailored
financing solution that demonstrates our 18 years of aviation experience,
creative structuring capabilities and relationship-focused approach. With an
iconic brand, great people and strong service offerings, we believe SAS is well
-positioned as Scandinavia's leading airline. We look forward to being part of
SAS' continued journey."
Benjamin Smith, CEO of Air France-KLM, says:
"This is an important day for SAS and for Air France-KLM. We are pleased to be
part of the winning bidding consortium selected by the board of SAS. Air France
-KLM looks forward to establishing strong commercial ties with SAS. With its
well-established position in Scandinavia and strong brand, SAS offers tremendous
potential to Air France-KLM. This cooperation will allow Air France-KLM to
enhance its position in the Nordics and improve connectivity for Scandinavian
and European travellers. We look forward to being a part of this new chapter in
SAS' history and thank the board of SAS for their trust."
Henrik Lind, CEO of Lind Invest, says:
"SAS is making substantial progress with its transformation plan SAS FORWARD and
we see great opportunities for the company ahead. We are proud to be part of
this new much needed transformative step for SAS, and look forward to support
the company as owners going forward."
Overview of key terms and conditionality of the transaction
The transaction structure agreed by SAS and the Investors is expected to
include, among other things and subject to final documentation, the following
key features:
· a total investment in the reorganized SAS corresponding to USD 1,175 million
(SEK 12.925 billion), including USD 475 million (SEK 5.225 billion) in new
unlisted equity and USD 700 million (SEK 7.7 billion) in secured convertible
debt, which would result in a shareholder structure post-reorganization (based
on total equity, but pre-conversion of the convertible debt) where:
(i) Castlelake holds approximately 32.0% of the equity and 55.1% of the
convertible debt