The Chinese government is now among the largest shareholders in deeply troubled Norwegian Air, after a Chinese leasing company joined other creditors and lenders in agreeing to convert what the airline owes them into equity. The airline’s shares promptly crashed when trading began Wednesday morning, after management confirmed the debt-to-equity conversions that also meet the Norwegian government’s terms for new crisis loans.
Norwegian’s shares fell a stunning 60 percent at the open, then leveled out again but were still trading down around 25 percent at midday. Newspaper Dagens Næringsliv (DN) noted that the new share capital registered on Wednesday dilutes earlier holdings, since there now are 3.1 billion shares in the company. That compares to 163.6 million shares on Tuesday afternoon.
Now holding nearly 13 percent of all the new shares is aircraft leasing firm BOC Aviation, described by the airline in a press release as “a company controlled by Sky Splendor Limited,” which in turn is controlled by the Bank of China Group Investment Ltd and a series of other Chinese firms ending up with China Investment Corp, wholly owned “by the People’s Republic of China.”
The Irish-registered leasing company Aercap Holdings emerged as the largest single shareholder in Norwegian. The message sent by the airline to the Oslo Stock Exchange Wednesday morning reported that Aercap now holds a 15.9 percent stake in Norwegian Air.
Share prices took a dive
The news quickly hit the share price, which fell from NOK 3.78 per share down to around NOK 1.50. It was trading at NOK 2.80 in the early afternoon and some analysts think it may fall farther. “I still think NOK 2 is too high, and that there’s a risk the share can land down near NOK 1,” Robert Næss of Nordea Investment Management told DN.
Norwegian Air’s management remained relieved, however, after updating how they’d saved the airline from bankruptcy by convincing creditors, like the companies from which they’ve leased aircraft, to swap debt for shares. The airline had already been struggling with heavy debt and re-thinking its strategy when the Corona crisis hit in early March and grounded nearly all flights.
With the future of important airline transport in Norway and thousands of jobs at stake, the Norwegian government offered a bailout of sorts amounting to NOK 3 billion worth of emergency, state-guaranteed loans. The crisis package would only be available, however, if the airline could convert debt to shareholdings in the “New Norwegian.” They did.
Restructuring efforts continue
“Now we can gain access to the state’s loan guarantees and we can continue to restructure the company,” stated Jacob Schram, who succeeded Norwegian Air founder Bjørn Kjos as CEO earlier this year. “Through this process, faith in the ‘New Norwegian’ and the company’s strategy has been supported by shareholders, the capital markets, lenders, leasing companies and other creditors.”
Trade Minister Iselin Nybø confirmed that the airline had met the state’s requirements. “Norwegian has done an impressive job in getting lenders and creditors to increase their capital,” Nybø stated in a government press release issued Wednesday morning. She noted that Norwegian Air, along with other airlines, still faces “demanding times,” but the government hopes “a stronger Norwegian can continue to deliver good airline services, also after the Covid-19 outbreak.”
Most all of Norwegian’s jets remain grounded, but more commercial flights are due to take off as Corona containment measures ease. Most will likely fly within Norway until borders open around the Nordic countries, Europe and beyond. Travel within Europe currently remains restricted until July 20, while intercontinental routes aren’t expected to resume until after that.