Investors lose out in £221m Norwegian deal: Airline to go in ‘hibernation’ for a year’ after securing state-backed loan
Norwegian Air has secured a £221million state-backed loan after completing a huge refinancing that virtually wiped out existing shareholders.
The budget airline will now go into ‘hibernation’ for a year, cutting staff, grounding or returning most of its fleet, and only flying between Scandinavian countries.
The Covid-19 outbreak has brought flights to a standstill as countries scramble to contain the virus.
Loan deal: Norwegian Air will now go into ‘hibernation’ for a year, cutting staff, grounding or returning most of its fleet, and only flying between Scandinavian countries
Ryanair and British Airways are among the airlines planning mass job cuts, while Easyjet has secured a £600million loan from the Treasury.
Although the money from the Norwegian government will help in the coming months, the company has warned it could need more.
And it had already been given £24.5million at an earlier stage in the crisis. To receive the latest loan, Norwegian’s bondholders, bankers and aircraft lessors took control of the company through a debt restructuring known as a ‘debt-for-equity’ swap.
It sold 400m new shares at 8p each, raising £32million.
It was in a precarious position after it rapidly over-expanded from being a European budget airline to offering transatlantic flights for £150.
Flights using Boeing 787 Dreamliner planes were disrupted by problems with cracks in blades in the engines, which were supplied by Rolls-Royce.
And Norwegian was also affected by the worldwide grounding of Boeing’s 737 Max planes over safety fears following two deadly crashes.