SAS announces that it has entered into an investment agreement with the winning
bidder consortium in its exit financing solicitation process, consisting of
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 part of the agreed
transaction structure, SAS has also entered into a new debtor-in-possession
("DIP") financing credit agreement for USD 500 million (SEK 5.5 billion)[1] with
Castlelake (the "New DIP Financing") to, among other things, refinance SAS'
existing DIP term loan, increase liquidity, and support SAS' path to exit from
its voluntary restructuring proceedings. The agreements are subject to review
and approval by the U.S. Bankruptcy Court for the Southern District of New York
(the "U.S. Court").
On October 3, 2023, SAS announced that it had selected the Investors as the
winning bidder consortium in its exit financing solicitation process, and that
the parties were in agreement on a transaction structure including a total
investment in the reorganized SAS corresponding to USD 1,175 million (SEK 12.925
billion). The winning bidder consortium has now increased its proposed
investment by USD 25 million (SEK 275 million) to a total of USD 1,200 million
(SEK 13.2 billion), which includes USD 475 million (SEK 5.225 billion) in new
unlisted equity and USD 725 million (SEK 7.975 billion) in secured convertible
debt, as well as Castlelake providing a USD 500 million (SEK 5.5 billion)
facility to refinance SAS' Existing DIP Financing (as defined below).
The investment agreement entered into by SAS and the Investors includes the
final terms of the Investors' equity investment, as well as the key terms for
the secured convertible debt and SAS' chapter 11 plan of reorganization (the
"Chapter 11 Plan"). The agreed investment structure, which (save for the
increased convertible debt amount) is consistent with the key terms set out in
the press release announced by SAS on October 3, 2023, will 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 55.2% of the
convertible debt;
(ii) the Danish State holds approximately 25.8% of the equity and 30.0% of the
convertible debt;
(iii) Air France-KLM holds approximately 19.9% of the equity and 4.8% of the
convertible debt;
(iv) Lind Invest holds approximately 8.6% of the equity and 10.0% of the
convertible debt; and
(v) the remaining approximately 13.6% of the equity will be distributed among
and held by certain creditors who may receive recovery in equity.
The New DIP Financing will be provided under a term loan agreement by way of a
non-amortizing senior secured super-priority debtor-in-possession term loan
facility in an aggregate principal amount of USD 500 million, entered into by
Scandinavian Airlines System Denmark-Norway-Sweden (the SAS Consortium), as
borrower, SAS AB and all wholly-owned subsidiaries of SAS AB that are debtors in
the chapter 11 cases as guarantors, and Castlelake as lender. The New DIP
Financing will refinance and replace SAS' existing DIP financing credit
agreement in the amount of USD 700 million (SEK 7.7 billion) entered into with
funds managed by Apollo Global Management (the "Existing DIP Financing"), under
which an initial tranche of USD 350 million (SEK 3.85 billion) was drawn by SAS
in September 2022. The terms of the New DIP Financing are substantially similar
to the Existing DIP Financing (the principal terms of which are described in the
press release announced by SAS on August 14, 2022), with some key differences,
including a lower interest rate and the removal of certain fees and equity
-linked features. The New DIP Financing has an initial term of nine months,
subject to two additional three-month extensions at the election of SAS (as well
as payment of certain escalating extension fees), and will be repaid in
connection with emergence from the chapter 11 process. The New DIP Financing
will be available to SAS subject to approval by the U.S. Court and following the
satisfaction of certain conditions precedent.
SAS will seek U.S. Court approval of the investment agreement and the New DIP
Financing as soon as possible in November 2023.
Anko van der Werff, President & Chief Executive Officer of SAS, says:
"By entering into this investment agreement, SAS is taking the next step in its
chapter 11 process in the US. The 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."
Conditionality of the transaction and expected recoveries in the chapter 11
process
The agreed transaction will need to be approved in connection with the
confirmation of the Chapter 11 Plan. SAS currently aims to receive approval from
the U.S. Court of the Chapter 11 Plan in early 2024, to be followed by obtaining
regulatory approvals and the implementation of a Swedish company reorganization
(Sw. företagsrekonstruktion) at the SAS AB level (likely to be filed by SAS AB
during 2024). The effectiveness of the transaction will occur upon the
fulfilment of certain conditions precedent, including receipt of all relevant
regulatory approvals, as further set out in the press release announced by SAS
on October 3, 2023. No approval is expected to be required from the existing
shareholders of SAS AB for the transaction.
SAS reiterates its expectation set out in the press release announced by SAS on
October 3, 2023, that there will be only a modest recovery for general unsecured
creditors, no recovery for subordinated unsecured creditors and no value for SAS
AB's existing shareholders upon emergence from the chapter 11 process. Any
payment of recoveries to creditors will be made only after the completion of the
transaction and the fulfilment of any conditions for payment to creditors. All
of SAS AB's common shares and listed commercial hybrid bonds are further
expected to be cancelled, redeemed and delisted (currently expected to occur
during the second quarter of 2024).
Information regarding chapter 11 cases
Additional information regarding SAS' voluntary chapter 11 cases is available on
SAS' dedicated restructuring website, https://sasgroup.net/transformation. U.S.
Court filings and other documents related to the chapter 11 cases in the U.S.
are available on a separate website administered by SAS' claims agent, Kroll
Restructuring Administration LLC, at https://cases.ra.kroll.com/SAS. Information
is also available by calling (844) 242-7491 (U.S./Canada) or +1 (347) 338-6450
(International), as well as by email at SASInfo@ra.kroll.com.
Advisors
Weil, Gotshal & Manges LLP is serving as global legal counsel and Mannheimer
Swartling Advokatbyrå AB is serving as Swedish legal counsel to SAS. Seabury
Securities LLC and Skandinaviska Enskilda Banken AB are serving as investment
bankers, and Seabury Securities LLC is also serving as restructuring advisor to
SAS. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel,
Rothschild & Co is serving as investment banker, and SkyWorks Holdings LLC is
serving as aviation consultant to Castlelake. White & Case LLP, Paul McGeown and
Sheppard, Mullin, Richter & Hampton LLP are serving as co-legal counsel to Air
France-KLM. Bech-Bruun Law Firm P/S is serving as legal counsel and Latham &
Watkins LLP is serving as US legal counsel to Lind Invest.
For further information, please contact:
SAS Press office, +46 8 797 29 44
Investor relations, +46 70 997 7070
SAS, Scandinavia's leading airline, with main hubs in Copenhagen, Oslo and
Stockholm, flies to destinations in Europe, USA and Asia. Spurred by a
Scandinavian heritage and sustainable values, SAS aims to be the driving force
in sustainable aviation and in the transition toward net zero emissions. We are
continuously reducing our carbon emissions through using more sustainable
aviation fuel, investing in new fuel-efficient aircraft and technology
innovation together with partners - thereby contributing towards the industry
target of net zero CO2 emissions by 2050. In addition to flight operations, SAS
offers ground handling services, technical maintenance and air cargo services.
Learn more athttps://www.sasgroup.net
ADDITIONAL INFORMATION
The press release does not constitute an offer to sell or issue, or the
solicitation of an offer to buy or acquire, or subscribe for, shares or any
other financial instruments in SAS.
This press release contains forward-looking statements that reflect SAS' current
view of future events as well as financial and operational development. These
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by or including words such as "intend", "assess", "expect", "may", "plan",
"estimate" and other expressions involving indications or predictions regarding
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subject to known and unknown risks, uncertainties and assumptions and other
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-looking statements. As a result of these risks, uncertainties, assumptions and
other factors, you should not place undue reliance on these forward-looking
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contained in this press release is subject to change without notice and, except
as required by applicable law, SAS does not assume any responsibility or
obligation to update publicly or review any of the forward-looking statements
contained in it, whether as a result of new information, future events or
otherwise.
[1] All amounts cited are based upon a USD/SEK exchange rate of 11.00