Norwegian raises equity at discount
Norwegian Air has raised 1.3bn crowns (€137m) in a share sale to help fund its expansion and cope with higher fuel costs after warning of a larger than expected loss in the current quarter.
The budget airline is trying to crack the transatlantic market by undercutting established rivals but faces pressures to control costs and shore up its balance sheet.
Its fate rests on the still unproven strategy of adapting the model of low-cost short-haul travel to longer routes. A share price decline of more than a third over the past year indicates that some investors have doubts.
The company, whose CEO is Bjorn Kjos, said yesterday that it had sold shares at 155 crowns each, a 9.7pc discount to Tuesday's closing price. Its shares fell 3.1pc immediately after the announcement.
"The equity issuance provides breathing space," said Davy Stockbrokers, which has a neutral rating on the stock.
The airline is massively expanding its transatlantic network to try to win market share, with routes between Canada and Europe starting in July. Its Norwegian Air International unit launched flights between Ireland and the United States last year, and it is expanding its capacity on those routes this summer.
It recently launched flights from Britain to Argentina, and will also fly within the south American country.
It plans to raise its capacity by 40pc in 2018.
The company said it could raise a further 200 million crowns (€21m) in an issue for investors who did not take part in the private placement. That would take the total of new shares issued to 9.67m, a 27.6pc increase from before the placement.
"The results of the share issue show investors have enormous confidence in the company. And they should not, because Norwegian Air is losing an enormous amount of money," said Karl-Johan Molnes, chief analyst at brokerage Norne Securities.
Norwegian Air warned this week of a wider-than-expected first-quarter loss.
The airline said its first-quarter pre-tax loss would come in at 2.6bn crowns (€273m), versus a 1.8bn crown loss in the corresponding period last year, and fuel expenses were 12pc higher than anticipated so far this year.