SAS has announced 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, Air France-KLM S.A. and Lind Invest ApS, together with the Danish state.
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 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.
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.
[1] All amounts cited are based upon a USD/SEK exchange rate of 11.00
Top Copyright Photo: Scandinavian Airlines-SAS Airbus A320-251N WL SE-RUB (msn 9518) ARN (Stefan Sjogren). Image: 960739.
SAS aircraft phpotp gallery:
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- Source: https://worldairlinenews.com/2023/11/05/sas-selects-the-investors-in-its-exit-financing-solicitation-process-including-air-france-klm-with-19-9-of-the-shares/
