SAS is asking the court in the USA for an extended deadline to present its rescue plan. It may also be necessary to carry out separate bankruptcy proceedings in Sweden.
SAS’ original schedule to end the bankruptcy proceedings in the USA by the first half of 2023 has long since been broken. Now the hope of leaving the US court before the end of 2023 may also be dashed. See the table below here.
Exclusive right for another 100 days
SAS has now asked for 100 more days to have the exclusive right to present, and get the creditors’ acceptance, for a plan to refinance the company.
This is evident from papers that SAS has sent to the bankruptcy court in New York.
The exclusive right means that it is just the company SAS who can put forward a rescue plan, a so-called Chapter 11-plan, for the judge in New York. No dissatisfied creditors can come up with other, own proposals during that period.
– Critical time
– We have contacted hundreds of potential investors.
That’s what it says in SAS’ application for an extended deadline.
SAS further states that they and their financial advisers are now in “ongoing talks” with interested investors. The deadline for bidding on new SAS shares expires on 18 September.
The aim is to bring about a bidding competition for the shares.
– Ending our exclusive right at this critical time will put the Chapter 11 process at risk, writes SAS in its application.
It is expected that the American asset manager Apollo Capital Management and the Danish state become the two clear biggest shareholders in the “new SAS”.
But if SAS succeeds in bringing out a real competitor to Apollo, the bid price can be pushed up to the delight of the creditors.
Because the more SAS gets paid for the new shares to be issued, the more the creditors will be able to save from their claims.
May take until winter 2024
It can almost be taken for granted that SAS will have the deadline extended to have the exclusive right to deliver a Chapter 11 plan. But the judge will make the formal decision on this only at a court hearing on 12 August.
SAS’s investor relations department writes in an email to E24 that this latest application is “a routine request that is common in larger and complex Chapter 11 cases”.
At the same time, an approved application means that SAS will only be two months away from the maximum limit of 18 months of exclusive rights granted in such Chapter 11 cases.
When asked by E24 when SAS now hopes to leave Chapter 11, the IR department uses the same time estimate as they have used since June:
– SAS strives to complete the legal process in the USA around the turn of the year.
The new deadlines nevertheless mean that SAS’s final exit from American bankruptcy protection may be postponed until the winter of 2024.
After SAS has hopefully received all necessary acceptances from the creditors by 8 January, the judge will finally sanction the plan.
Bankruptcy processing in Sweden?
Information that E24 has obtained shows that it is also relevant to have a separate legal process in Sverge. In that case, this probably parallels the end of the process in the USA.
The reason is said to be that the US jurisdiction does not cover issues surrounding some large creditors who do not have any business in the US. If these creditors do not accept the American solution, SAS may have to go through an extra round of Swedish law.
– A restructuring plan approved by an American court has no legal effect in Sweden. Such a plan is therefore not binding on the Swedish owners and creditors who have not voluntarily consented to (or later accepted) the measures that an American restructuring plan may contain.
That’s what Mikael Möller, professor emeritus of private law at Uppsala University, writes in an email.
It may thus become relevant for SAS to use the new Swedish law on reconstruction. It entered into force last year.
Following its bankruptcy proceedings in Ireland in 2021, Norwegian had to do a corresponding, short, exercise in a Norwegian court.
E24 has asked SAS the following questions:
– What can you say about the need to reconstruct SAS AB according to the new Swedish law on reconstruction and/or bankrupt certain (…) subsidiaries?
SAS has not answered this question.
Actively works against the European Commission
In the application to have the deadlines extended, SAS can say that they are now actively working towards the European Commission. SAS does this together with the Danish and Swedish states.
Expected write-downs in the autumn of billion-dollar loans that the two states have given will involve state aid. Such support must be approved by the commission.
But at the same time have The annulment of the European Court of Justice in May this year of the European Commission prior approval of the two states’ share purchase in SAS in 2020, caused major problems.
– Together with the two states, SAS has been engaged in long discussions with the European Commission to find a solution, it is stated in the court papers that SAS has submitted.
– Extensive work
SAS is now trying to fly around the legal turbulence that the EU court’s decision has created.
– The work includes close coordination with the commission, writes SAS.
They then elaborate on how this can happen:
- The commission makes a modified decision which retroactively approves the previous state aid from 2020.
- Measures are being taken to reduce the risk that a new approval for further state aid, in connection with Chapter 11, will be challenged.
– This process has required, and will continue to require, extensive work from SAS, the two states and their respective advisers, writes SAS.
– Ending the period of exclusive rights now will largely hinder this effort. This will create uncertainty that is detrimental to all parties.
Sold four airframes
According to SAS, the negotiations with the creditors are well under way. But some complex issues remain:
– Most of the remaining claims are from leasing companies and non-US creditors. This gives rise to legal and financial challenges that SAS continues to navigate through.
SAS has also sold four over 20-year-old Airbus A321 aircraft, which are no longer in use. The planes were sold without engines.
SAS has asked for the court’s approval not to disclose the sale price. But SAS says that the sale will “contribute significantly” to the company’s cash balance.
At the end of June, i.e. before the sale of the airframes, SAS had approx. NOK 7 billion in cash.
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