Shares in Scandinavian Airlines (SAS) plummeted by as much as 96% after the airline unveiled a recapitalization plan that offers no returns for existing shareholders. In a bid to avoid bankruptcy, SAS has secured an investment plan from Air France-KLM, the Danish state, and investment firms Castlelake and Lind Invest. These investors will inject a total of $1.18 billion into the company, acquiring approximately 86% of SAS. The remaining shares are expected to be distributed to creditors, with a delisting of the shares planned for next year.
The news was accompanied by a statement from SAS declaring that existing shareholders should not expect any value from their investments. As a result, shares in the airline tumbled to 0.06 Swedish kronor ($0.01) in early trading, after falling as much as 96% earlier during the session.
SAS has faced mounting debt, escalating costs, and increased competition from low-cost carriers. These challenges led the airline to initiate a restructuring plan last year and eventually file for Chapter 11 bankruptcy protection. Throughout this process, shareholders were made aware that their investments could be wiped out if a viable agreement was not reached.
Despite the risks involved, investors remained optimistic, and the share price closed 9.5% higher the day before the announcement. This surge in optimism helped SAS achieve a market valuation of just under $200 million.
Sydbank’s chief analyst, Jacob Pedersen, noted that management had consistently emphasized the risk to shareholders over several quarters. However, he also acknowledged that the SAS share price defied logic and reason until the very end.
Overall, SAS’s recapitalization plan significantly impacts existing shareholders as they face the prospect of losing their investments entirely.