SAS airline shares hit record high as Sweden says no to more money

Scandinavian Airlines (SAS) Airbus A320 planes are parked at Copenhagen Airport in Kastrup, Denmark, March 15, 2020. TT News Agency/Johan Nilsson via REUTERS ATTENTION EDITORS

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STOCKHOLM, June 7 (Reuters) – The Swedish government will not inject new capital into SAS (SAS.ST), its industry minister said on Tuesday, dealing a blow to the loss-making airline’s restructuring efforts and making its shares fall 14% to all-time lows.

SAS said last week that a restructuring plan announced in February depended on raising 9.5 billion Swedish crowns ($968 million) in cash and converting 20 billion crowns of debt into equity, warning of liquidity problems in the event of failure. Read more

But no shareholders, including major Swedish and Danish owners with 21.8% each in the carrier, have committed to the plan.

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“We want to be clear that we will not inject new capital into SAS in the future,” Sweden’s Karl-Petter Thorwaldsson told a news conference.

The minister said he would, however, propose to parliament that SAS be allowed to convert the debt it owes the government into equity. In the long term, the government still wants to leave SAS altogether, he added, reiterating a position of several years.

The airline said in a statement that Sweden’s decision to back the debt swap was an important step for a successful transformation.

Over the past few decades, Sweden has pumped 8.2 billion crowns ($834 million) into the airline, including through loans to save the company from collapse during the COVID-19 pandemic when the global air transport has almost come to a standstill.

The carrier was already struggling before the pandemic in the face of increasing competition from low-cost carriers such as Ryanair (RYA.I) and Norwegian Air (NAS.OL), and has sought agreements with unions on cost reductions.

“The Swedish decision puts serious pressure on creditors and employees to reach agreements,” Sydbank analyst Jacob Pedersen said in a note to clients.

“If the company can’t attract capital, because Sweden and maybe Denmark won’t invest more money, it might be a step on the way to the grave,” Pedersen said, which holds a sell rating on the stock which has fallen 67%. % year to date.

The Danish finance ministry was unable to comment immediately. The Danish government has previously said it sees itself as a long-term owner of the group.

CEO Anko van der Werff said last week that to attract new investors, SAS needed to cut costs on leased planes that sit idle due to the closure of Russian airspace and the slow recovery in Asia.

SAS isn’t the only one struggling to get back on its feet after the pandemic. Air France-KLM (AIRF.PA) also launched a 2.3 billion euro ($2.4 billion) share sale in May. Read more

($1 = 9.8127 Swedish kronor)

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Reporting by Anna Ringstrom in Stockholm and Stine Jacobsen in Copenhagen, additional reporting by Terje Solsvik; edited by Louise Heavens, Jason Neely and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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