Key Points:

  • SAS Scandinavian Airlines receives court approval for a $1.2 billion rescue package, involving Air France-KLM and Castlelake LP as new stakeholders.

  • The airline's Chapter 11 bankruptcy filing in 2022 was driven by pandemic impacts, pilot strikes, and competition from low-cost carriers.

  • The rescue plan includes substantial equity and debt investments, but signals minimal recovery for general unsecured creditors and no value for existing shareholders.

Court-Approved Rescue Package for SAS

SAS Scandinavian Airlines, navigating through a challenging period, has received approval from a New York bankruptcy court for a significant $1.2 billion rescue package. This financial lifeline, crucial for the airline's survival, brings Air France-KLM and private equity firm Castlelake LP on board as new owners. The Scandinavian flag carrier had filed for Chapter 11 bankruptcy protection in July 2022 amidst a drastic drop in passenger demand due to the COVID-19 pandemic, compounded by internal disruptions from pilot strikes and the pressure of competing with low-cost airlines.

Consolidation and Restructuring in the Aviation Sector

This agreement not only injects much-needed capital into SAS but also signals further consolidation within Europe's aviation industry. Air France-KLM is positioned to potentially acquire a controlling interest in SAS after two years, subject to specific conditions. The new shareholder group, which includes the Danish state and Lind Invest ApS, is set to provide $475 million in new equity and $725 million in secured convertible debt. Furthermore, Castlelake will refinance the existing $500 million Chapter 11 loan initially provided by Apollo Global Management Inc.

Implications for Creditors and Shareholders

SAS has indicated that the financial restructuring will result in only a modest recovery for general unsecured creditors, with no recovery expected for subordinated unsecured creditors. Existing shareholders are also unlikely to retain value as the airline moves through the Chapter 11 process. The airline anticipates the reorganization plan to receive court approval early next year, followed by necessary regulatory clearances in Sweden. SAS CEO Anko van der Werff expressed confidence in the investment, viewing it as a testament to the airline's potential to remain a key player in the airline industry for the foreseeable future.

The case is currently overseen by the U.S. Bankruptcy Court for the Southern District of New York, under case number SAS AB, 22-10925.