The fate of Norwegian Air was in the balance today after a deadline passed overnight for bondholders to vote on a rescue package for the transatlantic budget airline.
The carrier may run out of cash by mid-May unless its plan, which involves a swap of up to US$1.2 billion of debt into equity and hands over most of the ownership of the firm to lessors and bondholders, is approved by creditors and shareholders.
If the company wins backing from bondholders, it needs to win support of leasing companies by Sunday and for shareholders to approve the proposal at an extraordinary general meeting on Monday.
If successful, the plan would allow Norwegian to tap government guarantees of up to 2.7 billion crowns (US$260 million), which hinge on a reduction in its ratio of debt to equity, on top of 300 million crowns it has already received.
Norwegian Air warned on April 27 that taking the company through an alternative route of bankruptcy proceedings in Norway would destroy much of the value left in the company and that most creditors would likely recover little of their claims.
Some bondholders had said ahead of Thursday’s vote that they would vote in favour of the plan.
Norwegian grew rapidly in the last decade to become Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major U.S. cities, but it also accumulated debt and liabilities of nearly US$8 billion.