Analysts estimate that up to 97 percent of the value could be lost in the rescue of airline SAS, which remains at 5.8 billion on the Stockholm Stock Exchange. In other words, stock investors didn’t fully understand that their values were gone.
The crisis-stricken airline is working on a rescue package that will reduce debt and add new money.
The package must be implemented for SAS to survive, concludes Jacob Pedersen, aviation analyst at Danish Sydbank.
The Danish and Swedish state owners are expected to be central to the rescue when the debt is converted into equity. But for today’s shareholders, most of it is lost, Pedersen wrote in a recent analysis.
– Their values are gone
According to the analyst, SAS owes state owners six billion Swedish kronor in so-called hybrid debt, in addition to three billion in other loans.
SAS recently provided a diagram of what the company needs help with. The debt will be cut by converting 20 billion SEK from debt into equity, while 9.5 billion SEK will be raised in new capital.
The company stated that SAS had interest-bearing debt of NOK 40.5 billion at the end of the last quarter.
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Pedersen writes that states may write off nine billion in debt.
What terms the new investors and existing creditors will get is uncertain, but Pedersen made a calculation based on the circumstances when SAS refinanced the company in the fall of 2020.
This dilutes approximately 96-97 percent of existing shareholders, he writes.
In other words, such a scenario would mean that the shareholders who currently own one hundred percent of the SAS will leave three to four percent of the new SAS.
SAS CEO Anko van der Werve also warned shareholders that the crisis plan involved significant easing.
SAS shares are currently worth around SEK 5.8 billion on the Stockholm Stock Exchange.
In other words, stock investors did not fully understand that their values were gone and that their ownership interests were largely eliminated when the recapitalization was implemented, Pedersen wrote.
I think SAS will struggle to attract new investors
Pedersen also believes that state owners Denmark and Sweden will have to invest up to SEK 2 billion each if they want to maintain their holdings.
SAS expects a “significant portion” of the new capital to come from new investors, according to its latest quarterly report.
Swedish newspaper Dagens Industri has speculated that a group of foreign investors may be interested in acquiring SAS.
Pedersen believes that it will be difficult to get new investors, and that the likelihood of other airlines buying SAS is low.
He still believes that the door could be opened if new investors were able to acquire a majority of the shares in SAS.
He wrote many times in the past 15 years that investors put money into the airline to gain leverage.
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However, Pedersen stresses that such a group of investors could end up on a collision course with the Danish state in particular.
He notes that new investors will not necessarily keep Kastrup as the central airport for SAS, which was important to Denmark.
This, in turn, may mean that states must increase their ownership share in order to retain control, Pedersen points out. Today, Denmark and Sweden own 21.8 percent of each share in the company.
-No matter how we twist and turn it, the story of a potential major contributor on the road to SAS compels them to reconsider their participation in SAS, Pedersen wrote.
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