SAS exits chapter 11 process, CEO calls restructuring ""a new era""

Scandinavian airline SAS exited its US chapter 11 bankruptcy proceedings, it said on August 28, 2024, successfully restructuring over $2bn of debt. ""We have successfully completed our restructuring proceedings and we are now entering a new era,"" said SAS president and CEO Anko van der Werff. ""It has been a complex process and I’m thankful for the constructive collaboration with creditors and partners, for the valuable support from the board, as well as impressive efforts, energy and enthusiasm throughout our organisation."" The airline said that it has also adjusted its aircraft fleet and related costs and reached agreements with key stakeholders, creditors and vendors as part of the process. In addition, it delisted its stock. Distributions to creditors entitled to receive any cash, equity or contingent value notes are expected to take place during the coming month. SAS also concluded a competitive exit financing solicitation process, selecting Castlelake, Air France-KLM and Lind Invest, together with the Danish State, as the winning bidder consortium. The exit financing transaction included a total investment in reorganised SAS of $1.2bn, comprising of $475 million in new unlisted equity $725 million in secured convertible debt. The new owners of SAS have agreed to appoint a new board of directors for the Sweden-based airline. Danish business executive Kare Schultz was designated as new chairman of the board. Schultz commented: ""SAS has done a truly impressive job in navigating through the restructuring proceedings, and in building a competitive business positioned for growth."" Other board members include CEO of Sun Country Airlines Jude Bricker and CEO of PensionDanmark Peter Stensgaard Morch. The board comprises of ten members, seven of whom were elected by a general meeting. Schultz continued: ""Together with SAS’ new investors, board and management, as well as with our partners in the SkyTeam alliance, we will continue to collaborate with partners and customers to drive transformative changes in aviation."" Castlelake partner and deputy co-chief investment officer, as well as newly appointed member of SAS' board, Joe McConnell said: ""Castlelake congratulates SAS on its successful completion of restructuring proceedings and is gratified to have played an important role in its journey by providing a keystone financing solution."" Air France-KLM said the consortium now effectively holds an 86.4% stake in the share capital of the reorganised SAS. Air France-KLM said it will launch ""extensive commercial cooperation"" from September 1, 2024, in parallel to the proceedings. The agreement includes interline and codeshare agreements to connect their hubs and networks, as well as covering reciprocal loyalty programme benefits. ""SAS will enhance the group's footprint in the Scandinavian markets,"" said Air France-KLM CEO Benjamin Smith. ""SAS, Air France and KLM customers will now have a larger number of destinations via codeshares. Skyteam will immediately gain a new strategic member."" Air France-KLM said it invested a total of $144.5 million in SAS by subscribing for $109.5 million of common shares and by purchasing $35 million of senior secured convertible notes. It added that members of the consortium have agreed that Air France-KLM's stake could be increased to become a controlling shareholder after a minimum of two years. It said the investment was already considered in the group's financial trajectory for the year 2024 and has no impact on its medium-term outlook. Norton Rose Fulbright had advised SAS in its restructuring of the entirety of its fleet and financing contracts throughout the chapter 11 process. The firm helped SAS secure long-term lease restructurings from SAS’s aircraft lessors, assisted with the reconciliation and settlement of numerous and complex fleet claims (including the settlement of claims under its JOLCO financings) and in documenting new and amended lease commitments as part of the re-organisation of SAS’s fleet. The firm also helped to restructure key debt commitments and document new financing commitments prior to the company's emergence from chapter 11. ""The SAS chapter 11 restructuring was a fascinating and challenging case to work on,"" said Norton Rose Fulbright partner and the London team lead Owen Mulholland. ""The Norton Rose Fulbright team is delighted to see the restructuring come to a successful conclusion for SAS."" Weil, Gotshal & Manges is serving as global legal counsel and Mannheimer Swartling Advokatbyrå is serving as Swedish legal counsel to SAS. Seabury Securities and Skandinaviska Enskilda Banken AB are serving as investment bankers, and Seabury Securities 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 is serving as aviation consultant to Castlelake. White & Case, Euclid Law and Sheppard, Mullin, Richter & Hampton are serving as co-legal counsel to Air France-KLM. Bech-Bruun Law Firm is serving as legal counsel and Latham & Watkins is serving as US legal counsel to Lind Invest. Wilkie Farr & Gallagher is serving as legal counsel, Jefferies is serving as investment banker, AlixPartners, is serving as financial advisor, Alton Aviation Consultancy is serving as industry advisor, and DLA Piper is serving as Scandinavian counsel to the Official Committee of Unsecured Creditors. SAS had commenced chapter 11 in the US Bankruptcy Court in 2022 after contending with growing costs and dwindling demand for several years.