SAS has achieved a pivotal milestone in the SAS FORWARD transformation plan, a journey marked by strategic growth and reinforced alliances. This achievement is highlighted by a major transaction, marking a cornerstone in the airline’s Chapter 11 process in the US. Benefiting from a major investment from the Air France-KLM Group, SAS will shift from the Star Alliance to the SkyTeam Alliance.
A Consortium for Growth
Castlelake, L.P., Air France-KLM S.A., Lind Invest ApS, and the Danish state have emerged as the winning consortium, injecting a fresh investment of USD 1,175 million into the reorganized SAS. This infusion comprises new unlisted equity and secured convertible debt alongside a refinancing plan led by Castlelake.
SkyTeam Alliance Beckons
Air France-KLM will invest a total of USD 144.5 million, of which USD 109.5 million will be invested in common shares, and USD 35 million will be provided as secured convertible bonds. When the transaction is complete, Air France-KLM would own up to a maximum 19.9% non-controlling stake in the share capital of the reorganized SAS AB.
In the wings of this transformation, SAS eyes a strategic shift from the Star Alliance to the SkyTeam Alliance, spearheaded by Air France-KLM. This will mark an era of increased global connectivity and synergized operations.
Amidst this transformative phase, SAS’s commitment to operational excellence remains unwavering. Customers can expect uninterrupted service as the airline progresses through the transaction, slated for completion in 2024.
A Significant Achievement for SAS
Carsten Dilling, Chairman of the Board of SAS, says: “This is a significant achievement of our transformation plan, SAS FORWARD. We have carried out a broad, competitive, and thoroughly evaluated equity solicitation process, and we are confident that the selected bid is the most favorable for SAS, its creditors, and other stakeholders. Securing new capital is one of the key pillars in the SAS FORWARD plan. It will provide a strong financial foundation to help drive our airline forward and facilitate our emergence from the US Chapter 11 process. While there is still work remaining, I am pleased to see the great progress we are making to be a competitive and financially strong company.”
A Key Milestone for SAS Forward
Anko van der Werff, President & Chief Executive Officer of SAS, says: “The agreed investment is a key milestone in our SAS FORWARD plan, and it shows that our new investors believe in SAS and our potential to remain at the forefront of the airline industry for years to come. Further, our move towards a partnership with SkyTeam determines a clear path forward for the company. Through the completion of this process and the opportunities presented by being part of SkyTeam, we will be able to further enhance SAS’ offerings for the benefit of our colleagues, customers and communities. We look forward to building a bright future for SAS together.”
A Tailored Financing Solution
Joe McConnell, Partner and Deputy Co-Chief Investment Officer of Castlelake, says: “Castlelake is pleased to lead this investment in SAS’ future through a tailored financing solution that demonstrates our 18 years of aviation experience, creative structuring capabilities, and relationship-focused approach. With an iconic brand, great people, and strong service offerings, we believe SAS is well-positioned as Scandinavia’s leading airline. We look forward to being part of SAS’ continued journey.”
SAS Has Tremendous Potential as Part of SkyTeam
Benjamin Smith, CEO of Air France-KLM, says: “This is an important day for SAS and for Air France-KLM. We are pleased to be part of the winning bidding consortium selected by the board of SAS. Air France-KLM looks forward to establishing strong commercial ties with SAS. With its well-established position in Scandinavia and strong brand, SAS offers tremendous potential to Air France-KLM. This cooperation will allow Air France-KLM to enhance its position in the Nordics and improve connectivity for Scandinavian and European travelers. We look forward to being a part of this new chapter in SAS’ history and thank the board of SAS for their trust.”
Great Opportunities for SAS
Henrik Lind, CEO of Lind Invest, says: “SAS is making substantial progress with its transformation plan SAS FORWARD and we see great opportunities for the company ahead. We are proud to be part of this new much-needed transformative step for SAS, and look forward to support the company as owners going forward.”
As SAS steps into this new chapter, regulatory approvals and the completion of a Swedish Reorganization in 2024 are anticipated. The transaction promises renewed vigor, securing SAS’s future in the global airline space. SAS’s switch to SkyTeam will have significant implications for the passenger experience and EuroBonus loyalty program, which still need to be defined. We’ll be watching to see what comes next.
Update Message from SAS President & CEO to EuroBonus Loyalty Members
Anko van der Werff, President & CEO, SAS, sent a message to EuroBonus members updating them on the transaction as follows:
Today, we announced an exciting and transformative step to build on SAS’ 75-year-long history and position our airline at the forefront of the industry for years to come.
We are securing an investment in the reorganized SAS of USD 1,175 million from Castlelake, L.P., Air France-KLM, and Lind Invest together with the Danish state. The investment will provide us with the financial resources to be an even stronger airline for our customers and communities across Scandinavia and other markets.
In connection with this milestone, we intend to eventually join the airline alliance SkyTeam, at which time we will exit Star Alliance. While we are proud to have been a founding member of Star Alliance, we are confident that joining SkyTeam will further strengthen our customer offering.
Importantly, nothing is changing as of now. We still need to obtain regulatory approvals and meet certain conditions to complete the investment transaction and change alliance. Here’s what that means for our airline and for you as a EuroBonus member:
* You can continue to book flights with us as usual. We look forward to continue welcoming passengers in Scandinavia today, and well into the future as we move forward as an even stronger airline.
* Until we complete the transaction, we remain part of Star Alliance. You as a EuroBonus member will continue to enjoy your usual benefits when flying on our partner airlines, and you will be able to accrue and redeem points on Star Alliance partners – just like today. Award bookings with our partners remain valid.
* As a EuroBonus member, you can continue to accrue and redeem points on SAS and on non-air partners.
* Your status and benefits as a EuroBonus member when you fly with SAS will not be impacted.
We will keep you informed about what to expect over the coming months and will provide updates on the EuroBonus website under latest news.
We are proud of our legacy as Scandinavia’s leading airline since 1946 and look forward to continue serving you for years to come.
Thank you for your continued loyalty.
Overview of Key Terms and Conditions of the Transaction
The transaction structure agreed by SAS and the Investors is expected to include, among other things and subject to final documentation, the following key features:
- a total investment in the reorganized SAS corresponding to USD 1,175 million (SEK 12.925 billion), including USD 475 million (SEK 5.225 billion) in new unlisted equity and USD 700 million (SEK 7.7 billion) in secured convertible debt, which would result in a shareholder structure post-reorganization (based on total equity, but pre-conversion of the convertible debt) where:
(i) Castlelake holds approximately 32.0% of the equity and 55.1% of the convertible debt;
(ii) the Danish State holds approximately 25.8% of the equity and 29.9% of the convertible debt;
(iii) Air France-KLM holds approximately 19.9% of the equity and 5.0% of the convertible debt;
(iv) Lind Invest holds approximately 8.6% of the equity and 10.0% of the convertible debt; and
(v) the remaining approximately 13.6% of the equity is most likely to be distributed among and held by certain creditors who may receive recovery in equity.
The convertible debt is expected to be secured and have a maturity of seven years and an interest of SOFR + 650bps per year, and may be converted into common shares based upon certain terms and valuation metrics. The convertible debt is further expected to be subject to an upfront fee corresponding to 1.5% of the committed amount, payable to the Investors by the reorganized SAS;
- refinancing of the existing DIP term loan with a new USD 500 million (SEK 5.5 billion) DIP loan provided by Castlelake, to be repaid in connection with emergence from the Chapter 11 process;
- implementation of the Chapter 11 Plan in Sweden by way of SAS AB (i.e., the listed parent company for the SAS group) filing for a Swedish Reorganization in 2024, but not in respect of any other entity in the SAS group or the airline as such; and
- cancellation and redemption of all of SAS AB’s common shares (for zero consideration) and all listed commercial hybrid bonds (expected to receive only a modest recovery) and, consequently, a delisting from Nasdaq Stockholm, Nasdaq Copenhagen and Oslo Børs following completion of the Swedish Reorganization (currently expected to occur during the second quarter of 2024).
Following an agreement with the Investors on the final terms and conditions of the investment, including the future governance of the reorganized SAS, the confirmation and effectiveness of the Chapter 11 Plan will remain subject to various conditions precedent, including obtaining certain approvals, including from the U.S. Court, antitrust authorities, civil aviation authorities, the European Commission, and EFTA Surveillance Authority (as applicable), SAS leaving Star Alliance, the implementation of a Swedish Reorganization at the SAS AB level, and other customary conditions. There currently remains uncertainty with respect to satisfying such conditions and obtaining required approvals, as well as the terms and timing thereof (particularly with respect to the approval from the European Commission related to State aid and the participation by Denmark and Sweden in the restructuring process).
The Investors’ winning bid, which is pursuant to the US court-approved equity raise process, is affirmatively supported by the Official Committee of Unsecured Creditors and indicates that USD 325 million (SEK 3.575 billion) is expected to be allocated to general unsecured creditors in cash and equity. Based on initial estimates, which remain subject to material change, this indicates a recovery for the majority of the general unsecured creditors of approximately 5–20% of the nominal value of such claims; however, such recoveries will vary further depending upon (i) which entities such claims are asserted against, (ii) if such claims have any guarantee claims, and (iii) which entities the guarantee claims are to be asserted against. Additional details related to the transaction structure and expected recoveries for creditors, including to which extent (if any) the creditors will receive cash or equity consideration, will be announced separately and be included in the disclosure statement. The Chapter 11 Plan is will be filed with the US Court after finalizing the negotiations related to the transaction. Negotiations with stakeholders will continue until the emergence of the Chapter 11 process. In line with what has been communicated, SAS currently expects that there will be no recovery for subordinated unsecured creditors and no value for SAS AB’s existing shareholders.
SAS currently aims to receive approval from the US Court of the Chapter 11 Plan in early 2024, to be followed by obtaining regulatory approvals and the implementation of a Swedish Reorganization at the SAS AB level during 2024. The effectiveness of the transaction will occur upon the fulfillment of the conditions precedent, including receipt of all relevant regulatory approvals.