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Norwegian Air Nears Rescue Deal After Winning Debtor Support

Bloomberg logo Bloomberg 5/4/2020 Veronica Ek

(Bloomberg) -- Norwegian Air Shuttle ASA struck a deal to swap about $1 billion in debt for equity in last ditch talks with bondholders and lessors, taking it one step closer to securing state loan guarantees needed to see it through the coronavirus outbreak.

The guarantees are “crucial to getting through the crisis,” Jacob Schram, the discount carrier’s chief executive officer, said Sunday after the accord with bondholders. Norwegian has also now received “strong support” from plane-leasing firms, it said Monday ahead of a shareholder vote on the survival plan.

In earlier talks, Norwegian Air failed to get the required two-thirds majority support from holders of 250 million euros ($275 million) of bonds, leading negotiations to continue into the weekend.

Shares of the airline, down 86% this year, remain suspended until the outcome of the shareholder meeting -- which started at 8:30 a.m. local time -- has been made known.

Norwegian Air was already battling to stay in business before the coronavirus struck after piling up a debt mountain funding one of the European airline industry’s most rapid expansions. The debt-for-equity exchange is part of a plan to meet terms set by Norway to access to the bulk of a 3 billion-krone ($290 million) package of loan guarantees.

The carrier won support from lessors for a minimum conversion to equity of $730 million, up from the previously announced $550 million. It earlier reached an agreement with its last hold-out bondholders, so that the value of their bonds after conversion may be increased by up to 38%, against 20% earlier.

Read More: Norwegian Air Reaches Deal With Bondholders Across All Bonds

(Updates with details of bondholder, lessor accords in final paragraph.)

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