By Nerijus Adomaitis and Terje Solsvik
OSLO (Reuters) – The fate of Norwegian Air was in the balance on Friday after a deadline passed overnight for bondholders to vote on a rescue package for the transatlantic budget airline.
Bondholders were set to start a meeting at 1400 GMT on Thursday to vote on the airline’s debt-to-equity plan, the first major test of its rescue efforts amid the coronavirus outbreak.
But the airline sent a revised offer at 1359 GMT, calling it final, and pushed back the deadline to accept to 2100 GMT. Since then, Norwegian Air has sent no messages about the outcome.
“We have nothing to communicate for the moment. We will issue a message to the Oslo stock exchange when we do,” said a Norwegian Air spokeswoman.
The carrier may run out of cash by mid-May unless its plan, which involves a swap of up to $1.2 billion of debt into equity and hands over most of the ownership of the firm to lessors and bondholders, is approved by creditors and shareholders.
If the company wins backing from bondholders, it needs the support of leasing companies by Sunday and for shareholders to approve the proposal at an extraordinary general meeting on Monday.
If successful, the plan would allow Norwegian to tap government guarantees of up to 2.7 billion crowns ($260 million), which hinge on a reduction in its ratio of debt to equity, on top of 300 million crowns it has already received.
Norwegian warned on April 27 that taking the company through an alternative route of bankruptcy proceedings in Norway would destroy much of the value left in it and that most creditors would likely recover little of their claims.
Some bondholders had said ahead of Thursday’s vote they would vote in favour of the plan.
Norwegian market value wiped out https://fingfx.thomsonreuters.com/gfx/mkt/dgkvlgdwopb/norwegian%20market.PNG
Norwegian Air stock has cratered https://fingfx.thomsonreuters.com/gfx/mkt/bdwpkredyvm/norwegian%202.PNG
Norwegian grew 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 U.S. cities, but it also accumulated debt and liabilities of nearly $8 billion.
Before the new coronavirus outbreak all but shut down air traffic due to government-imposed travel restrictions, the airline had taken steps to cut costs and routes, aiming to make a full-year profit for the first time in four years.
Currently only paying invoices vital to its minimum operations, such as salaries for staff still employed and critical IT infrastructure, Norwegian has put payments for ground handling, debt and leases on hold.
(Writing by Gwladys Fouche; Editing by David Clarke and Mark Potter)