SAS Scandinavian Airlines (SK, Copenhagen Kastrup) has announced it has chosen a consortium led by Air France-KLM, lessor Castlelake, Danish investment firm Lind Invest ApS, and the Danish state as the winning bidders for its Chapter 11 exit financing totalling USD1.175 billion, including new equity and convertible debt.

The agreed transaction includes USD475 million in new unlisted equity and USD700 million in secured convertible debt. Castlelake will also refinance SAS's current debtor-in-possession (DIP) term loan of USD500 million, to be repaid following emergence from Chapter 11.

The transaction will result in a shareholder structure post-reorganisation where:

  • Castlelake holds 32.0% of the equity and 55.1% of the convertible debt;
  • the Danish state holds 25.8% of the equity and 29.9% of the convertible debt;
  • Air France-KLM holds 19.9% of the equity and 5.0% of the convertible debt;
  • Lind Invest holds 8.6% of the equity and 10.0% of the convertible debt; and
  • the remaining 13.6% of the equity is distributed amongst certain creditors.

The move will see SAS eventually leave Star Alliance and join Skyteam, of which Air France-KLM is a founding member, the company confirmed in a statement. It will also establish a commercial partnership with Air France-KLM and its affiliated airlines (subject to customary approvals). The airline will continue to operate as usual throughout the implementation of the transaction.

The winning bid is supported by the official committee of unsecured creditors of SAS, which are expected to be allocated USD325 million in cash and equity, representing 5-20% of the nominal value of their claims.

SAS aims to receive approval from the US courts of its Chapter 11 plan in early 2024, followed by regulatory approvals and the implementation of a Swedish reorganisation of SAS AB (the listed parent company for SAS Group) during 2024. The latter will see SAS AB's common shares and listed commercial hybrid bonds cancelled, redeemed, and delisted during the second quarter of 2024 from Nasdaq Stockholm, Nasdaq Copenhagen, and Oslo Børs. Existing SAS shareholders are not expected to receive any value, and only a modest recovery is expected for commercial hybrid bondholders.

The final details and documentation for the agreement are yet to be completed and must be approved as part of SAS's Chapter 11 reorganisation plan. Approval is required from the US Bankruptcy Court, antitrust and civil aviation authorities, the European Commission, and the European Free Trade Association Surveillance Authority, and is subject to other customary conditions.

"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's history and thank the board of SAS for their trust," commented CEO Benjamin Smith.

"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 [restructuring] plan and will provide a strong financial foundation to help drive our airline forward and facilitate our emergence from the US Chapter 11 process," said SAS Chairman Carsten Dilling.

"Our move towards a partnership with SkyTeam determines a clear path forward for the company," added President and CEO Anko van der Werff. "The agreed investment [...] shows that our new investors believe in SAS and our potential to remain at the forefront of the airline industry for years to come."