Norwegian Air Drops 60% as Reality Sinks In for Shareholders

(Bloomberg) -- Norwegian Air Shuttle ASA dropped as much as 60% after completing a recapitalization that hands control of the company to aircraft lessors and bondholders.

Investors had in recent days stubbornly traded Norwegian’s shares far above the price of a discounted equity issue that came on top of an $830 million debt conversion. On Wednesday, the stock collapsed after the company confirmed it had finally clinched a state-guaranteed loan that will keep it afloat in the next few months and increased its share capital.

The debt conversion has marginalized current shareholders, with leasing companies Aercap Holdings NV and BOC Aviation Ltd. flagging stakes of 16% and 13%, respectively, putting them among the low-cost carrier’s biggest owners. BOC is controlled by the Chinese government through Bank of China Ltd.

Norwegian Air traded 27% lower at 2.77 kroner as of 2:45 p.m. in Oslo. The stock hit 1.50 kroner earlier, the worst since the company sold shares to the public in 2003. The carrier issued shares at 1 krone apiece earlier this month.

Norwegian has “still too many planes, and a broken business model,” Sanford C. Bernstein analysts Daniel Roeska and Alex Irving wrote in a note to clients. “The underlying problems are still present. Its long-haul low-cost business model has struggled to make money –- perhaps it never will. There is more to do before its problems are over.”

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Norwegian Air reached agreements with its creditors in early May after dramatic negotiations. The restructuring allowed it to meet strict terms set by the Norwegian government to guarantee a new 3 billion-krone loan and make sure the airline didn’t run out of cash after the coronavirus pandemic compounded existing financial troubles.

Yet Norwegian Air has said it will likely need more capital as it braces for a protracted crisis. The company expects virtually all of its fleet to remain grounded until the second quarter next year, and normal operations to only return in 2022.

“The months ahead will remain challenging and with a high degree of uncertainty for the industry,” Chief Executive Officer Jacob Schram said in a statement on Wednesday. “Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues.”

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