Norwegian Air Shuttle, the low-cost carrier fighting to qualify for a bailout from its home country, presented a plan to relieve part of its heavy debt burden that would largely wipe out existing shareholders.
The airline is racing against the clock to meet terms set by Norway to access the bulk of a three billion-krone (€260m) package in loan guarantees.
With most of its fleet grounded, the company has proposed a debt restructuring and capital increase by mid-May that would unlock the cash it needs to survive the coronavirus crisis.
The plan would give aircraft leasing companies that are owed more than $3bn (€2.75bn) including overdue payments more than half of the equity in the reconstructed airline.
Bondholders would control the second largest chunk.
To save cash, Norwegian would hunker down, grounding all but a handful of local flights until April 2021, when it would start to ramp up for the summer travel season. The resulting airline would be leaner and have much fewer aircraft.
Norwegian is asking the holders of three bonds to convert about $350m into equity, while aircraft lessors would swap at least $500m of the 33.3 billion kroner they are owed. The proposal would leave existing owners of the stock with 5.2pc of the company.