Norwegian Air Shuttle is looking to strengthen its balance sheet by converting debt to equity by issuing new shares as the company tries to stay in business following the global outbreak of coronavirus.
The airline has been struggling due to Covid-19 as many countries go into lockdown resulting in the Norway-based business grounding most of its fleet.
Norwegian Air’s board is proposing actions and implementations that aim to fulfill the requirements of the second and third tranches of the government state guarantee programme that will release NOK 3.00 billion (USD 291.54 million) in total funding.
The financing is dependent on the company reducing its ratio of debt to equity.
Norwegian Air’s proposal aims to convert debt to equity by key stakeholders including aircraft lessors, bond holders, convertible bond holders and suppliers.
The state aid package directed at the company is divided into three tranches, the first comprises NOK 300.00 million, followed by NOK 1.20 billion in the second part of the funding.
Under the terms of the third tranche, the remaining NOK 1.50 billion, or NOK 2.70 billion if tranche two has not been drawn, will be available if the loans guaranteed are accompanied by private sector involvement.
Norwegian Air has grown rapidly in the last decade to become Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major US cities.
The group accumulated debts and liabilities of close to USD 8.00 billion by the end of 2019.
On 16th March, Norwegian Air announced temporary layoffs of 7,300 employees, which represents around 90.0 per cent of its workforce.
A day later, the company called on the country’s government for help saying it needed cash within weeks not months.
Norwegian Air posted revenue of NOK 43.52 billion in the year ended 31st December 2019, up 8.1 per cent from NOK 40.27 billion in the previous 12 months.
Earnings before interest, taxes, depreciation and amortisation or rent costs increased significantly to NOK 7.31 billion in 2019 (2018: NOK 2.17 billion).
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