Norwegian to raise €309m in fight to save its low-cost dream
STRUGGLING Scandinavian airline Norwegian has turned to Norway's richest person as it hunts for a new buyer after Aer Lingus owner IAG ditched its pursuit of the low-cost carrier last week.
In danger of breaching financial covenants as its dream of providing profitable, low-cost, long-haul travels continues to fade, Norwegian said yesterday that it's raising 3bn kroner (€309m) in a rights issue that's underwritten by investors including shipping billionaire John Fredriksen.
It gives Norwegian breathing room to find a suitor as its losses continue to mount in a competitive environment.
Last week, IAG chief executive Willie Walsh questioned the use by Norwegian of expensive 787 Dreamliners to fulfil its long-haul ambitions. But he also said that he believes Norwegian will survive. "I don't buy into the idea that Norwegian disappears, to be honest with you," he said. "I think Norwegian will, in some form, continue."
Norwegian's proposed rights issue is subject to shareholder approval at an extraordinary general meeting.
Norwegian said: "Following, among other issues, severe delays in aircraft and engine deliveries, the company has for some time been assessing financing needs and financing alternatives, including raising equity."
It added that it put the equity-raising plan on standby in December, but had not been in a position to execute it while engaged in potential acquisition talks.
"The company believes that a strengthened balance sheet will increase its competitiveness and stand-alone financial strength," it said. "The board will nevertheless continue to be willing to engage in consolidation discussions that can develop shareholder value in Norwegian."
Norwegian CEO Bjorn Kjos said: "I've known John Fredriksen for a long time, and we even have a CFO who has worked for Fredriksen.
"We're very happy to have the Fredriksen group as a part of that guarantee consortium."
Mr Kjos, who rejected two previous offers from IAG, has been struggling to weather a cash crunch. His company is awash with capacity after one of the fastest growth spurts in aviation history, at a time when a European fare war has depressed revenue.
Asked about Lufthansa, which held talks with Norwegian last year, and Ryanair, which has denied speculation of its interest, Mr Kjos declined to discuss specifics.
"I can't say who, I can only say that more than one interested party has contacted us," he said. IAG and Lufthansa declined to comment. Ryanair didn't respond to requests for comment. IAG's decision to walk away from the talks had spurred concerns about Norwegian's finances, with analysts widely predicting that a capital increase was likely - though the rights issue is bigger than many had forecast.
Additional reporting by Bloomberg