August 16, 2022

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- No companies want this - E24

– No companies want this – E24

The New York Bankruptcy Court held its first hearing after SAS filed for bankruptcy protection. Along the way, the SAS framework was put into place during the process, while the judge sparked laughter among the lawyers.

The day after the strike of more than 900 SAS pilots, SAS management filed for bankruptcy protection in the United States.
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The first hearing in the SAS Chapter 11 process took place in Bankruptcy Court for the Southern District of New York on Thursday afternoon.

This is the official start of the bankruptcy protection process, as SAS plans to implement the SAS Forward Savings Scheme.

Already up front, the law firm Weil, Gotshal & Manges LPP, which is assisting SAS in the process, can say the firm has about $700 million, the equivalent of seven billion kroner, in cash.

During the court hearing, a number of proposals came from the law firm Weil, Gotshal & Manges LPP, which is assisting SAS in the process. These proposals are based on what the SAS could spend money on in order to continue business as usual while protecting the company from bankruptcy.

The proposals included points that the Eurobonus customer program should continue, fuel payments should be made, and employees should be paid what the company owes them, just to name a few of the twelve proposals made.

Most of the proposals were completely in the judge’s favour, while at some points he chose to make minor changes. At one point, he announced that he would delete part of the show, much to the attorney’s laughter.

– I really expected you to say that. The lawyer said I made this point in my document.

SAS CEO Anko van der Werf said in a statement that the judge’s decisions ensure the company will continue its operations as usual when the restructuring process begins in the United States.

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We remain focused on providing customers with the service they are accustomed to, while increasing our efforts to implement our comprehensive SAS Forward transformation plan, says van der Werf.

Acceptance by the judge

The hour-and-a-half hearing largely contained explanations and discussions on the points, but when the Eurobonus program, among other things, was in focus, the judge suddenly took the floor.

– I have a little special case to bring. An old friend of my wife told me that they will have a ticket with SAS soon. They think it was fun telling me when they found out I’d be the judge of the case. Judge Michael E. Wells: “I have no interest in this trip, but I’m telling it to show openness.”

– Not a close friend, asked a lawyer, who got an answer that he was not a bankruptcy lawyer and that he should have nothing to say.

Also when the Star Alliance SAS collaboration was discussed as part of, the judges came up with a little anecdote when he was going to tell them what he thought of the proposal.

– I’ve been on some trips in my life where I’ve had to take my luggage, then come back to check it again. It’s not something I want to demand of others. So that’s perfectly fine for me, said Judge Wales.

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Comprehensive, expensive and intrusive

On Tuesday, it became known that crisis-stricken SAS, and a number of the company’s subsidiaries, had filed for bankruptcy protection in the United States to ensure continued operations. Bankruptcy protection means that no creditor can claim their money back or file for SAS bankruptcy as long as the company is under protection. In the United States it is called “Chapter 11”.

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No companies want to go through the Chapter 11 process unless it’s absolutely necessary, says Stine Dalenhag Snertingdalen, attorney and partner at Kvale.

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Snertingdalen, who specializes in restructuring and bankruptcy, says the process is extensive and expensive, as well as intrusive for the company.

– The Chapter 11 process is somewhat similar to the Norwegian Bankruptcy Protection and Reconstruction process, which took effect in May 2020. But the US Chapter 11 process is more flexible and robust, and gives a large international group the opportunity to achieve comprehensive solutions that are respected by creditors around the world, as you say.

According to Snertingdalen, when big companies like SAS do this, it’s because they don’t have all the shareholders with them for the solution they want to achieve, or they want to stop demand from a minority of creditors trying to promote claims in at the expense of others.

Expert: Stine Dalenhag Snertingdalen has been appointed by the Department of Justice as a member of the Bankruptcy Board.

The Chapter 11 process can help create a solution to SAS that is better for creditors than if the company were to go bankrupt. The attorney says that the creditors will vote on the proposal, and a minority will not be able to stop a solution to SAS that the majority of creditors want.

The SAS will be able to continue business as usual while the process continues, and a court in the United States will not accept the filing of any of the companies covered by the Chapter 11 process for bankruptcy by creditors in other countries, Snertingdalen continues.

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Early Tuesday, New York’s bankruptcy court ruled that all 14 companies in the SAS group that have applied for bankruptcy protection will be dealt with in the same case.

All parties must be taken care of

Attorney Stine Dalenhag Snertingdalen compares Operation Chapter 11 as medical treatment for a critically ill patient.

– While the company undergoes such treatment, it calms down the creditor’s approach to work on recovery. Operation Chapter 11 also contains some medications and surgical tools that can be used to help the company recover. This is how Norwegian bankruptcy protection, and reconstruction, works, she says.

It is important to remember that the starting point of the Chapter 11 process is always that creditors will come out better than in actual bankruptcy. Snertingdalen continues that the judge must look after the interests of all parties.