SAS plans to set aside $325 million for creditors’ debt recovery

Scandinavian airline SAS AB expects to allocate up to $325 million for the debt recovery of its general unsecured creditors as part of an updated Chapter 11 bankruptcy plan, with holders of commercial hybrid bonds likely to get a maximum of 25% of their claims back. 

Holders of the airline’s listed commercial hybrid notes are expected to receive an initial cash recovery of up to 9.4% of the nominal value of such claims when it emerges from bankruptcy proceedings in the US around June, SAS said in a statement Monday. They face the possibility of receiving an additional cash distribution of up to 15.6%, or as much as 25% cumulatively, at a later date under certain conditions, it added.

There will be no recovery for subordinated creditors and no value for existing shareholders, it said. 

The announcement came after the debt-laden carrier said late last month that it will cancel and redeem all of its common shares and commercial hybrid bonds when the bankruptcy proceedings complete. SAS filed for bankruptcy in July 2022, after the Covid-19 pandemic disrupted travel, fuel prices rose and its pilots went on strike, and in October reached a $1.2 billion refinancing deal with a group of investors including Air France-KLM and Castlelake.

SAS said it expects to allocate up to approximately $250 million in cash and $75 million in new equity to general unsecured creditors, with about $213 million for potential distribution at a later date under certain conditions. A final confirmation on the amount and timing of any additional distributions may take several years, it added. 

SAS will allot the new equity to specified classes of creditors including those from Denmark, Norway and Sweden, aircraft lessors, pilot unions, and key suppliers, it said. Other debtholders, including owners of the listed commercial hybrid bonds and certain creditors holding smaller claims, are expected to receive a cash-only recovery.