Norwegian Air Shares Plunge During Bid to Raise Cash

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Norwegian Air Shuttle ASA slumped to an almost seven-year low after offering heavily discounted shares to raise about 3 billion kroner ($350 million) to shore up its balance sheet.

The rights issue, underwritten by investors including John Fredriksen, Norway’s richest man, is intended to buy the Oslo-based airline time following the collapse of protracted talks with suitors including IAG SA. After the owner of British Airways and Iberia walked away late last month, focus turned to Norwegian’s finances, which have been hurt by a European fare war and higher fuel prices.

Norwegian is selling shares in a 2-for-1 rights offer at 33 kroner each, the carrier said in a statement on Monday, after announcing the rights issue on Jan. 29. That compared with a price of 97.34 kroner at Friday’s close, though the airline said shareholder subscription rights should be taken into account when calculating the discount. Regardless, the stock slumped as much as 15 percent to the lowest since June 2012.

Other investors that backed the rights issue include Danske Bank and DNB ASA, Norway’s largest lender.

Norwegian Air Shares Plunge During Bid to Raise Cash

The capital increase “can’t avoid transferring significant values from existing shareholders to the new shareholders,” said Per Hansen, an investment economist at Nordnet, in response to the market reaction.

Weighed down by losses amid a rapid expansion over the past years, Norwegian is cutting costs and selling planes alongside the rights issue. The discount carrier reported a net loss of 1.45 billion kroner for 2018, 19 percent narrower than the previous year.

Capacity growth is set to slow in each quarter of 2019, while four European bases are slated to close. Norwegian’s 2019 savings plan -- aimed at cutting costs by 2 billion kroner -- should “significantly improve the financial position,” it said earlier this month.

The shares recovered to trade 2.9 percent lower at 94.50 kroner at 3.36 p.m. in Oslo, valuing the company at 4.3 billion kroner.

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