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SAS Updates On Creditor Recovery in Chapter 11 Process

SAS Enhances Chapter 11 Recovery Prospects – Secures Backing from Creditors’ Committee

SAS is set to present an updated proposal for its Chapter 11 reorganization to the New York Southern District U.S. Bankruptcy Court. This plan will outline potential recoveries for unsecured creditors, including SAS AB’s commercial hybrid bondholders. The court must approve the final plan, which SAS may enhance further.

Bondholders with SAS AB’s commercial hybrids can anticipate an initial cash recovery of up to 9.4% of the claim’s nominal value once SAS exits the Chapter 11 process. A subsequent cash distribution of up to 15.6% may also occur, bringing the total possible recovery to 25%. This additional distribution depends on certain conditions, which the reorganization documents will elaborate on.

The Unsecured Creditors’ Official Committee, involved in the Chapter 11 proceedings, endorses the new plan. It strongly recommends that all unsecured claim holders vote to accept SAS’s reorganization proposal.

Projected Compensations

SAS has updated its financial outlook, emphasizing that unsecured creditors will only see a limited monetary return. It also states that subordinate creditors should not expect any payback, and current SAS AB shareholders will likely lose their investment value. Following the company’s reorganization under Chapter 11, all common shares and commercial hybrid bonds associated with SAS AB will be canceled and removed from active trading.

The reorganization plan sets aside nearly USD 325 million for unsecured creditors. This fund comprises approximately USD 250 million in cash and around USD 75 million in newly issued equity. According to the agreement with new investors, a significant portion of this cash, about USD 213 million, is reserved for future payment to these creditors, subject to certain conditions. The availability of these funds depends on resolving specific State non-tax claims or confirming they do not exist. Any payments SAS makes for these claims and related costs will lessen the fund. Determining the exact amounts and distribution timeline for additional creditor payments may take years.

With the ongoing restructuring, SAS predicts that commercial hybrid bondholders will initially receive between 6.9% and 9.4% of their claim’s nominal value after the company exits Chapter 11. Additionally, bondholders might get another 13.1% to 15.6%, possibly reaching a total recovery of 20.0-25.0%, upon the distribution of reserved funds. Other general unsecured creditors are also expected to receive cash and/or equity as part of the restructured SAS, detailed in the Chapter 11 Plan.

SAS Chapter 11 Planned Recoveries

  • Holders of permitted general unsecured claims against SAS AB:

    • Expected to receive an initial payout between 6.9% and 9.4% of the claim’s nominal value after Chapter 11 resolution.
    • May obtain an additional cash payout, with a potential total recovery of 25%, depending on Restricted Funds availability.
  • Creditors with approved unsecured claims at the SAS Consortium:

    • Foresee an initial recovery rate of 1.7% to 2.7% of the claim’s nominal value post-Chapter 11.
    • Subsequent distributions could increase recovery to 7.7%, with the possible release of Restricted Funds.
    • Smaller creditors with claims not exceeding USD 1.499 million may receive a 10% cash reimbursement upon emergence.
  • Stakeholders of general unsecured claims with entities under the Gorm Blue entities (Dark Blue, Deep Blue, Light Blue, Ocean Blue, and Sky Blue Limited):

    • Initial return is projected to be between 0.8% and 1.2% of the claim’s nominal value after Chapter 11 emergence.
    • An additional up to 2.5% could be distributed, bringing the total possible recovery to a maximum of 3.7%, pending the availability of Restricted Funds.
  • Claimants with approved general unsecured claims in Scandinavian Airlines of North America Inc.:

    • Expected recovery ranges from 0.5% to 1.5% of the nominal claim value after the Chapter 11 process concludes.

Understanding the Recovery Predictions and Potential in SAS AB’s Restructuring

Creditor recovery in the SAS AB restructuring plan hinges on several critical factors. Each creditor’s claim against a specific debtor and any supporting guarantees can significantly influence the outcome. Particularly, holders of SAS AB’s publicly traded hybrid bonds see their potential recovery closely tied to a mix of complex elements. These elements include the volatile SEK/USD exchange rate and shifts in the eligible creditor groups’ profile and claims. Additionally, the resolution of potential State non-tax claims plays a crucial role.

SAS has restructured its framework to accommodate a new equity injection, projected at USD 75 million. This cash infusion accounts for approximately 13.6% of SAS’s equity, not factoring in potential changes from convertible debt. This capital boost primarily benefits certain classes of unsecured creditors such as:

  • Government entities from Denmark, Norway, and Sweden
  • Active business associates, including aircraft leasing companies and pilot unions
  • Key suppliers and other creditors that form the SAS Consortium

Creditors who possess hybrid bonds or hold smaller claims can expect to receive their recovery strictly in cash.

Timeline and Contingencies in the SAS AB Chapter 11 Proceeding

SAS AB Focuses on Successfully Navigating Chapter 11 with a Planned Endorsement and Active Stakeholder Engagement

As SAS AB tackles the complexities of Chapter 11, a clear strategy emerges. By February 6, 2024, the airline aims to secure approval for its Chapter 11 Plan and Disclosure Statement. Though subject to changes and legal confirmation, these documents set the stage for the company’s recovery. The company targets the year’s first quarter for court approval of its restructuring approach.

Key influencers, such as the Official Committee of Unsecured Creditors, champion the acceptance of SAS AB’s plan. Their significant backing highlights the widespread support for the company’s turnaround.

Realizing SAS AB’s Chapter 11 Plan depends on meeting specific conditions. These include obtaining court approval and regulatory permissions and successfully reorganizing the parent company. Upon satisfying these key requirements, SAS AB anticipates a strong comeback from Chapter 11 by mid-year 2024. The targeted emergence reflects the company’s commitment to financial stability and operational efficiency.

Resources for Monitoring SAS AB’s Chapter 11 Developments

Stakeholders can access comprehensive information about SAS AB’s Chapter 11 progress through SAS’ specialized restructuring portal at https://sasgroup.net/transformation.

For legal documentation and US process-related filings, Kroll Restructuring Administration LLC has established a platform at https://cases.ra.kroll.com/SAS.

Additional assistance is obtainable through their helpline and email, catering to North American and international inquirers.

Expert Advisory Roles in the Restructuring of SAS AB

Leading the coordination of SAS’ multilayered restructuring advice is Weil, Gotshal & Manges LLP, supported by Mannheimer Swartling Advokatbyrå AB on Swedish legal matters. Investment banking insights are provided by Seabury Securities LLC and Skandinaviska Enskilda Banken AB, with Seabury Securities also contributing as a restructuring advisor. Castlelake, L.P.’s advisors are the legal team of Skadden, Arps, Slate, Meagher & Flom LLP, Rothschild & Co’s banking advice, and aviation guidance from SkyWorks Holdings LLC.

Air France-KLM relies on legal assistance from White & Case LLP, Paul McGeown, and Sheppard, Mullin, Richter & Hampton LLP, while Lind Invest ApS combines legal advisement from Bech-Bruun Law Firm and US-specific counsel from Latham & Watkins LLP. The Unsecured Creditors’ Committee enlists Wilkie Farr & Gallagher LLP for legal advice, Jefferies LLC for banking expertise, AlixPartners, LLP for financial strategies, industry analysis from Alton Aviation Consultancy LLC, and regional legal insights from DLA Piper LLP.


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