Breaking Private Equity News Europe - SAS welcomes Castlelake & Air France-KLM as new co-Pilots

Breaking Private Equity News Europe – SAS welcomes Castlelake & Air France-KLM as new co-Pilots

Scandinavian airline SAS has announced that it will be taking on Castlelake and Air France-KLM as new major shareholders.

The move comes as part of a rescue deal to help the airline recover from the financial challenges it has faced in recent years.

Breaking Private Equity News Europe - SAS welcomes Castlelake & Air France-KLM as new co-Pilots 1

As part of the deal, existing shareholders will be wiped out.

Castlelake is a U.S. investment firm that specializes in aviation assets, while Air France-KLM is a major European airline.

The two companies will become new major shareholders in SAS, which will help the airline to secure the funding it needs to continue operating. The deal is worth $1.18 billion and is expected to be completed soon.

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SAS has struggled financially in recent years, and the COVID-19 pandemic has only made things worse.

The airline has been forced to cut routes and reduce its workforce in order to stay afloat. The new shareholders are expected to bring much-needed stability to the airline, which will help it to recover and grow in the years to come.

Breaking Private Equity News Europe – SAS, Castlelake, and Air France-KLM: A New Shareholding Structure

Scandinavian Airline SAS has announced a new shareholding structure that includes Castlelake, an American private equity firm, and Air France-KLM as major shareholders.

The new ownership structure was approved by SAS shareholders on October 3, 2023, and will take effect immediately.

Under the new structure, Castlelake will take a stake of about 32%, Air France-KLM’s stake will be around 20%, and the Danish state will hold about 26%.

The remaining shares will be held by other investors. The total new equity investment in SAS amounts to $1.18 billion.

Castlelake’s investment in SAS is not its first in the aviation industry. The U.S. investment firm has previously invested in several airlines, including Avianca, LATAM Airlines, and Norwegian Air Shuttle. Castlelake’s investment in SAS is a sign of its confidence in the airline’s future prospects.

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Air France-KLM’s investment in SAS is also significant.

The French-Dutch airline group has been looking to expand its presence in the Nordic region, and its investment in SAS will give it a foothold in the Scandinavian market. Air France-KLM will also provide SAS with access to its global network of routes and customers.

The new shareholding structure marks a significant change for SAS, which has been struggling with financial difficulties in recent years.

The airline filed for bankruptcy in November 2022, but has since restructured its operations and cut costs in an effort to return to profitability.

With the backing of Castlelake and Air France-KLM, SAS is now well-positioned to compete in the highly competitive aviation market. The new shareholders bring a wealth of experience and expertise to the table, and their investment will help SAS to invest in new technologies and expand its route network.

Overall, the new shareholding structure is a positive development for SAS and its shareholders. The airline now has a solid financial foundation and a strong network of partners to help it grow and thrive in the years to come.

Bankruptcy and Restructuring

Scandinavian airline SAS has been struggling financially for some time and has been forced to file for bankruptcy protection under US Chapter 11 bankruptcy rules.

This legal process allows companies to reorganize their business and finances so they can continue operating while paying off their debts.

SAS has been working on a restructuring plan to help it emerge from bankruptcy proceedings. As part of this plan, the airline has wiped out its existing shareholders and brought on new investors to provide much-needed capital.

The new shareholders include US private equity firm Castlelake, Air France-KLM, and Danish investment firm Lind Invest.

Castlelake will hold the largest stake of around 32%, while Air France-KLM will own approximately 20%, and Lind Invest will hold 8.6%. The Danish state will also be a major shareholder, holding around 26% of the company.

The restructuring plan also involves moving SAS from its current Star Alliance group to Air France-KLM’s SkyTeam. The airline hopes that this transaction will finally take it out of Chapter 11 bankruptcy protection and allow it to operate as a reorganized SAS.

Overall, SAS’s bankruptcy and restructuring plan is a significant step towards securing the airline’s future.

The new shareholders bring much-needed capital and expertise to the table, while the move to SkyTeam should help SAS improve its financial performance and competitiveness in the industry.

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Investment and Financing Details

Scandinavian airline SAS has announced that US investment firm Castlelake and Air France-KLM will become new major shareholders in the airline alongside the Danish state and Danish pension funds.

The new shareholders will invest a total of $1.18 billion in the airline, which will be used to pay off debt, secure convertible bonds, and refinance the company.

Air France-KLM will invest up to $144.5 million for as much as 19.9% of SAS. Castlelake will invest up to $500 million for as much as 49% of the airline.

The Danish state and Danish pension funds will invest up to $535 million for as much as 31.1% of SAS. The financing package is expected to be completed by the end of the year.

The investment will be used to pay off debt, secure convertible bonds, and refinance the company. The airline will issue secured convertible bonds worth $350 million and convertible debt worth $250 million.

The refinancing will include a $550 million equity rise, which will be used to strengthen the airline’s balance sheet and support its growth plans.

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The investment will also enable the airline to continue its transformation plan, which includes expanding its network, improving its product offering, and reducing its costs. The airline expects the investment to provide it with the financial stability it needs to weather the current challenging market conditions and emerge stronger in the future.

Overall, the investment and financing details demonstrate the confidence that Castlelake, Air France-KLM, and the Danish state and Danish pension funds have in the future of SAS.

The investment will provide the airline with the financial resources it needs to pay off debt, secure convertible bonds, and refinance the company, while also enabling it to continue its transformation plan and support its growth plans.

Role of Private Equity Firms

Private equity firms have become an increasingly popular source of financing for struggling airlines. In the case of Scandinavian airline SAS, private equity firm Castlelake has played a significant role in the company’s recent restructuring efforts.

Together with Air France-KLM, Castlelake has become one of SAS’s new major shareholders, investing $1.175 billion in the airline’s recapitalization plan.

Private equity firms such as Castlelake typically invest in companies that are struggling financially, with the aim of turning them around and generating a profit.

They do this by providing capital, expertise, and strategic guidance to help the company improve its operations and financial performance. In the case of SAS, Castlelake’s investment is intended to help the airline weather the ongoing crisis in the aviation industry and emerge stronger on the other side.

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Castlelake is not the only private equity firm to have taken an interest in the aviation industry. Apollo Global Management, for example, has invested in a number of airlines in recent years, including Jet Airways and Sun Country Airlines.

Similarly, Lind Invest, a Danish investment firm, is also a participant in the consortium that is investing in SAS.

Private equity firms can bring a number of benefits to struggling airlines. For one, they can provide much-needed capital to help the airline stay afloat during difficult times.

They can also bring expertise and experience in turning around struggling companies, which can be invaluable in a crisis. Finally, private equity firms can provide a fresh perspective on the airline’s operations and help identify areas where improvements can be made.

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Overall, private equity firms have become an important player in the aviation industry, particularly during times of crisis.

As airlines continue to grapple with the ongoing effects of the COVID-19 pandemic, it is likely that we will see more private equity firms stepping in to provide much-needed capital and expertise.

Implications for Shareholders and Bondholders

Scandinavian airline SAS has announced that it will wipe out existing shareholders as part of its rescue deal, which involves Castlelake and Air France-KLM becoming new investors alongside the Swedish and Danish governments.

This move will have significant implications for shareholders and bondholders alike.

Existing shareholders, including retail shareholders, will be heavily impacted by the deal as their shares will be rendered worthless.

The airline’s share price has already plummeted following the announcement, and it is unlikely to recover anytime soon. Shareholders who have invested in the airline will lose their entire investment, which will be a significant blow to many retail investors.

The convertible bonds issued by SAS will also be affected by the deal. The airline will issue $700 million in secured convertible debt as part of the rescue deal, which will dilute the value of existing convertible bonds.

Bondholders may need to accept a lower conversion price or a lower interest rate as a result of the deal.

However, the deal is not all bad news for bondholders.

The new secured convertible bonds will be backed by the airline’s assets, which will provide additional security for bondholders.

The airline’s existing debtor-in-possession term loan will also be refinanced by Castlelake, providing further support for the airline’s financial position.

In terms of common shares, the rescue deal will result in significant dilution of existing shareholders. Air France-KLM and Castlelake will become major shareholders in the airline alongside the Swedish and Danish governments, leaving existing shareholders with a much smaller percentage of the company.

Overall, the rescue deal will have far-reaching implications for shareholders and bondholders alike. While the deal will wipe out existing shareholders, it will provide additional security for bondholders and help to stabilise the airline’s financial position.

However, the dilution of existing shares will be a significant blow to many retail investors who have invested in the airline.

Impact on the Aviation Industry

The announcement that Castlelake and Air France-KLM will become new major shareholders of Scandinavian airline SAS has significant implications for the aviation industry, particularly in Europe.

With the ongoing challenges faced by the industry due to the COVID-19 pandemic, this investment is a positive development for SAS and the wider aviation industry. The $1.2 billion investment will provide SAS with much-needed capital to continue operations and expand its services.

This investment also presents new opportunities for the aviation industry, particularly in terms of carrier groups and alliances. SAS has announced that it will be leaving the Star Alliance and joining the SkyTeam Alliance, which includes Air France-KLM, Delta Air Lines, and other major carriers.

This move will provide SAS with greater access to new markets and customers, and enable it to compete more effectively with other carrier groups.

The investment by Castlelake and Air France-KLM also highlights the growing importance of low-cost airlines in the aviation industry. SAS has faced increasing competition from low-cost carriers in recent years, and this investment will enable it to better compete in this market.

It also demonstrates the continued growth and importance of the low-cost airline sector in the industry.

Overall, the investment by Castlelake and Air France-KLM is a positive development for SAS and the aviation industry as a whole.

It provides much-needed capital for SAS to continue operations and expand its services, while also presenting new opportunities for carrier groups and alliances.

The move to SkyTeam will enable SAS to better compete in the market and expand its reach, while the investment by Castlelake and Air France-KLM highlights the growing importance of low-cost airlines in the industry.

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