SAS AB has entered into a debtor-in-possession (DIP) financing credit agreement for $700 million (the equivalent of approximately SEK7.0 billion) with funds managed by Apollo Global Management (Apollo).
SAS states that the DIP financing, along with cash generated from ongoing operations, enables the company to continue meeting its obligations throughout the chapter 11 process. The DIP financing is subject to approval by the US Bankruptcy Court for the Southern District of New York.
The DIP financing is structured as a non-amortizing senior secured super-priority debtor-in-possession delayed-draw term loan facility with a nine-month maturity from the closing date. The maturity date can be extended incrementally up to an 18-month term, subject to escalation fees. Loans under the DIP Facility are priced at SOFR (Secured Overnight Financing Rate) plus 9.0%, which may be increased by 2.0% per annum during the continuance of any event of default under the DIP Term Loan Agreement. The DIP loan also requires the payment of fees to Apollo: an upfront fee of 1% of the total commitment on closing, an unused commitment fee of 2.0% and an initial work fee of $1 million. Certain fees are also payable upon the occurrence of specific events, including a break-up fee of 1.0%, and an exit fee of 4.0%.
SAS said that it selected Apollo’s DIP financing proposal after a competitive process and added that it considers the terms of the DIP financing to be on market terms. Some $350 million of the loan will be available following the Court’s approval of the DIP Term Loan Agreement, which is expected to take place in mid-September.
“We are pleased to have secured this financing commitment from investment firm Apollo Global Management, which follows an extensive and competitive process,” says Carsten Dilling, Chairman of the Board of SAS. “With this financing, we will have a strong financial position to continue supporting our on-going operations throughout our voluntary restructuring process in the U.S. Apollo Global Management has a long track record of helping build stronger, more competitive businesses and extensive experience in the aviation sector. With their substantial financing commitment, we can now focus entirely on accelerating the implementation our SAS FORWARD plan, and to continue our more than 75-year legacy of being the leading airline in Scandinavia.”
“SAS is one of Europe’s leading airlines and we are pleased to support the business operations as they implement their restructuring plans to emerge a stronger company,” said Apollo Partner Antoine Munfakh. “At Apollo we have a wealth of experience in commercial aviation and fully support the comprehensive SAS FORWARD plan as well as the goals of recapitalizing the Company upon its emergence from the chapter 11 process.”
SAS anticipates receiving Court approval for its DIP financing by mid-September 2022.
The SAS FORWARD plan incorporates raising at least SEK 9.5 billion in a new equity capital as well as reducing or converting over SEK 20 billion of pre-petition debt, hybrid securities and other obligations into new shares or other forms of consideration. SAS noted that it intends to conduct a competitive capital raising process to secure the best available terms and conditions for such equity capital raise in the first half of 2023. Apollo is permitted to convert its DIP loans into new equity of the company and has agreed to negotiate with the Danish State terms and conditions under which the State would acquire up to $250 million of equity interests of the company associated with Apollo’s conversion of its DIP loans into new equity.