Norwegian Air to Convert Debts into Equity to Help Airline Survive Pandemic

Undoubtedly the airline industry around the globe is among the worst hit by coronavirus pandemic. The pandemic has seen reduced air traffic hence all airlines have most of their aircrafts grounded.

Norway’s national carrier, Norwegian Air (NWC) will be converting its debts to equity as a measure to help the airline survive plunge caused by coronavirus pandemic. This was agreed upon following a shareholders meeting.

In the meeting, 95% of shareholders votes were in support of the company to convert debts into equity.

The company will also be adopting other measures against the pandemic among them, tapping into government credit guarantees.

Before the meeting, Norwegian Air had claimed to have won support and back up of its lessors.

The airline says its lessors are willing to convert to least $730 million of debt into equity, up from $550 million earlier. Further talks are ongoing.

With the significant contributions from lessors and bondholders, the company expects to convert more than 10 billion crowns ($958 million) in debt to equity,” said Norwegian Air.

Shareholders voting of the company was done online while being broadcasted on public broadcaster NRK. Norwegian Air claims 95% of its fleet are grounded leaving the company in a dire situation.

According to the airline, if shareholders voted against converting debt into equity, then most probably by mid-May the company would be out of cash.

A week earlier, bondholders had voted to reject the suggestion.

Another voting session is slated for the future in which shareholders are expected to vote for a plan to raise 400 million crowns ($38.4 million) from the sale of new stock.

If this sails through, the debt into equity conversion will allow the airline tap into government guarantees of up to 2.7 billion crowns. The airline has already received similar guarantees totaling to 300 million crowns.

These conversion and bailout plans pose a threat to shareholders ownership, analysts are claiming shareholders will be left with only around 5.2% ownership of the company.

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