Norwegian Defers Two Bond Payments

Norwegian Air Shuttle (NAS) bondholders have voted on the deferral of two unsecured bonds. The airline states that this will give it better financial freedom going forward.

Norwegian Air Shuttle B737
Norwegian have confirmed that the repayment periods on two of their bonds have been extended. Photo: Edward Russell via Wikmedia Commons

A Norwegian press release confirms that there were separate bondholder meetings to discuss the amendment of two unsecured bonds. The meetings resulted in the successful amendment of bonds NAS07 and NAS08 on September 16.

Ultimately, this allows Norwegian to postpone repayment of the bonds in question, giving the airline room to ready its finances

Breathing space

Acting CEO Geir Karlsen is positive about what the majority of the bondholders voted for in these meetings. The executive claims that the decision helps the company reach its target for the year.

“We’re pleased with the bondholders’ decision to amend the bonds as it will give us added financial headroom going forward,” Karlsen said in the press release.

“We believe it demonstrates faith in our strategy and support of the important measures Norwegian is undertaking to return to profitability.

“The company’s operational performance continues to improve, and we are on track to reach the targeted cost-reductions of two billion NOK ($224m) in 2019.”

Norwegian Boeing 787-9
The airline’s acting CEO, Geir Karlsen is hoping that the extensions allow the firm to sort its financials following a troubled period. Photo: Anna Zvereva via Wikimedia Commons

Financial setbacks

Reuters reports that Norwegian would increase the bond voluntary repayment price to 105%. This allows the redemption price to remain at 105% at maturity. The extension follows Norwegian’s request to extend the maturity dates for two of its bonds to 2021 and 2022.

This was for an exchange of a security package, which includes the takeoff and landing slots at Gatwick Airport. The airline has been going through loss-making periods recently and is striving to improve its financials.

Previously, the carrier reported a loss of over $170 million for the first quarter of this year. This was due to some of their Boeing 787s still under repair due to faulty Rolls Royce engine issues. Also, its fleet of 18 737 MAX have been grounded since April.

Boeing 737-8JP
Norwegian have put in multiple fundraising measures over the last year to improve its economic situation. Photo: Alan Wilson via Wikimedia Commons

Company shakeups

Subsequently, Norwegian tried to increase its cash flow by selling bank shares to raise funds. The firm sold its stake in a financial services firm, Norwegian Finans Holding. Swedish and Finnish parties bought the stake from the airline, generating $254m in funds.

The companies have collaborated on credit cards and reward programs along with financial support. However, the partnership is now solely commercial with the carrier’s stake being sold off.

The airline continued its process to increase funds with a winter schedule shakeup. From next month, 10 routes between Europe and the United States will be stopped. Although, the company is yet to confirm whether this is a temporary measure or a permanent fix.

A spokesperson for Norwegian confirmed that the amendments give a two-year extension for bonds to be paid. Norwegian’s executives will be hoping that this is enough time for a turnaround in their fortunes.