Norwegian Air Shuttle has today said it intends to strengthen its balance sheet by issuing new shares in the company to the value of $350 million (NOK 3 billion). The airline says the plan, if approved at an extraordinary general meeting due to be held on 19th February, will increase its “financial flexibility” and create “headroom” in relation to the covenants of its outstanding bonds.
That issue was top of the agenda at the end of last year when analysts claimed Norwegian’s balance sheet would drop below a minimum set in its loan agreements. If that had happened then there was a risk its investors would have called in their loans – with the risk that Norwegian would have been plunged into insolvency.
Billionaire investor, John Fredriksen is amongst the investors involved in the new share issue.
“Norwegian has been through a period with significant growth. Focus going forward will increasingly be on cost savings and CAPEX reductions,” explained Norwegian’s chief executive, Bjørn Kjos.
“We will now get in place a strengthened balance sheet that supports the further development of the company.”
The “extensive” cost reduction plan includes savings of at least $235 million over the next 12-months (although believed to be aiming for closer to $335 million). The airline also says it now plans to delay the delivery of new aircraft – According to the latest public figures from Boeing, the low-cost airline currently has 92 of its single-aisle 737MAX aircraft on order and a further 5 of the widebody 787-9 Dreamliners yet to be delivered.
On top of that, Norwegian again confirmed that it will “divest” a significant number of its aircraft in a joint venture financing deal. We’ve already learned that Norwegian plans to close some bases in Europe and the United States, and it’s likely that we’ll see route cancellations or changes in the near future.
Preliminary financial figures released by the airline for 2018 reveal it lost approximately $259 million last year (EBITDA) on the back of $4 billion in revenue. Norwegian says it plans to release its full financial figures on 7th February. The company has lost 13% on the Oslo Stock Exchange since news broke this morning.
Confirming that it had rejected two bids from IAG to take over the company because the airline group “significantly” undervalued Norwegian, the airline says it will “continue to be willing to engage in consolidation discussions” going forward.