Norwegian Could Benefit From New Debt Laws In Norway

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Yesterday, Norway’s parliament voted on legislation that replaces current regulation on debt negotiations. This law relaxes rules for converting debt into equity, which could help save struggling Norwegian Air Shuttle.

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There could be another lifeline for Norwegian as it seeks to stay alive during the passenger downturn. Photo: Getty images

Reuters reports that the Norwegian government is introducing this law to help save companies from potential bankruptcy amid the downturn in economic activity.

Existing debts

Norwegian had already been in a dire financial situation before the pandemic took the aviation industry by storm. Moreover, in 2019, the airline admitted that it was not even expecting to make a net profit until 2021.

However, the unprecedented drop in demand and the global travel restrictions rocked the firm. The government of Norway has been offering its support to the low-cost carrier, but with losses amounting, there are still substantial concerns. Subsequently, four of the airline’s subsidiaries in Sweden and Denmark have filed for bankruptcy, putting 4,700 jobs at risk.

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Throughout the last year, there have been several measures introduced to help Norwegian get to a better financial state. Photo: Getty Images

Better organization

Justice Minister Monica Maeland spoke about the new law to Norwegian’s parliament. She explained that it would help companies identify areas that are crucial to their safety. This move will then help them restructure more effectively.

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Maeland said the following, as reported by Reuters:

“(The new law) is a more efficient tool to … sort out what parts of a business can be strong enough to survive.”

Most of the operator’s planes will remain on the ground during this period. Therefore, with the bulk of its flights suspended, it is looking to convert its debt to equity to qualify for state guarantees. Klemet Gaski, a lawyer from Oslo-based law firm Bull & Co, explained that now, only 50% of debtors and 50% of shareholders have to agree to a solution. This process is far less strict than the current rules.

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The health crisis has already forced part of Norwegian’s holdings to restructure its finances this month. Photo: Getty Images

A helping hand

Altogether, this legislation could be the saving grace for Norwegian as its debts continue to pile up. With its financial situation already up in the air, it would not have been able to benefit from such lenient rules that are now in place.

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Now, with the government looking to save its country’s economy, several companies will have more support than they have ever had. Therefore, it won’t be surprising to see Norwegian take advantage of the new measures in place as it once again fights for its survival. 

Simple Flying reached out to Norwegian for comment on how the debt laws in Norway will help it but did not hear back before publication. We will update the article with any further announcements.

What are your thoughts on the new debt legislation in Norway? Do you see Norwegian benefiting from the new rules? Let us know what you think of the situation in the comment section.

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