Crisis-hit SAS has secured a $700 million commitment from US investment firm Apollo Global Management.
Debt-laden airline SAS has secured so-called DIP (“debt in possession”) financing from US investment firm Apollo Global Management, according to a stock exchange announcement Sunday night.
Funding from Apollo will help sustain SAS during the company’s restructuring process, SAS wrote in a press release Sunday night.
With this funding, we will have a strong financial position so that we can continue to carry out ongoing operations during the voluntary restructuring process in the United States, says Chairman Carsten Dilling.
SAS hopes that $700 million in financing will be approved by the bankruptcy court in mid-September.
– SAS is one of the leading airlines in Europe and we are pleased to support the business during the period when the company is implementing the reconstruction process to become a stronger company, says Antoine Manfh at Apollo.
Expensive, but necessary
Jacob Pedersen, aviation analyst at Danish Sydbank, believes this is a very important agreement for SAS.
– That’s the main agreement for SAS to succeed with the Chapter 11 process. It’s of course a very important agreement, but it’s also a very expensive one with high loan interest rates, he told E24.
The company announced on July 5 that the company has begun voluntary court proceedings in New York, US to file for bankruptcy protection, a so-called Chapter 11 petition.
Pedersen says Apollo has extensive experience helping struggling companies and could become a major shareholder in SAS.
– In this agreement we get the name of a company that can become a major shareholder. Apollo specializes in corporate finance in crisis and this is very important to SAS. Now that they have this agreement, they can go ahead and continue negotiating with their creditors to reduce their debt.
If the SAS had not received such an agreement, they would have had to cancel the entire Chapter 11 process. It’s an expensive agreement, but one that is absolutely necessary in the current situation of SAS.
Pedersen has no idea how long the Semester-11 process will take.
It is very difficult to say anything about her. SAS itself said 9-12 months, so we have to believe it.
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high interest rate
According to the report, half of the 700 million will be available to SAS after court approval, while the remaining 350 million will be available when certain conditions in the agreement are met.
The interest on the loan is in line with the SOFR reference rate (secured overnight financing rate), which at the time of writing is 2.28%, plus an additional nine percentage points. The report states that interest increases by two percentage points each year in the event of a default.
Loan financing includes several payments, due nine months after the last payment. The term can be extended three times, three months at a time, provided that SAS pays the Apollo fee in the form of 0.75, 1.0 and 1.25 percent of the loan amount respectively.
In terms of financing, the airline has leased brokerage firms Seabury Securities LLC and SEB, as well as law firms Weil, Gotshal & Manges LLP and Swartling Advokatbyrå AB.
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