By Terje Solsvik and Nerijus Adomaitis
OSLO (Reuters) - Norwegian Air (OL:NWC) will sell new shares at a 79% discount to the latest traded price on the Oslo Bourse, the budget carrier said on Tuesday as it seeks to boost its equity in order to qualify for Norway's government aid package.
Shareholders on Monday approved a plan to convert nearly $1 billion of debt into equity and raise up to 400 million crowns ($39 million) from the sale of new shares to help the airline survive the coronavirus pandemic.
Norwegian aims to sell new shares at 1.0 crown each, it said, far less than Tuesday's closing price of 4.80 crowns as it seeks to attract investors even while the debt conversion leads to a massive dilution of ownership stakes.
The company plans to raise between 300 million and 400 million crowns, and has so far secured commitments from investors planning to buy shares for more than 100 million crowns, it added.
The debt conversion and share sale will allow Norwegian Air to tap government guarantees of up to 2.7 billion crowns, which hinge on a reduction in leverage, on top of 300 million crowns it has already received.
If the process fails however, Norwegian Air is at risk of running out of money by mid-May even though it only pays invoices vital to maintaining minimum operations, it said on April 27.
The debt conversion will hand majority ownership to the airline's creditors and could leave current shareholders with just 5.2%, and with further dilution for owners who do not take part in the share issue.
The airline that brought Europe's low-cost business model to the transatlantic market, flying more people to New York than any other non-U.S. carrier, has now grounded 95% of its fleet and furloughed or laid off most staff.
For the next 12 months, Norwegian plans to fly only seven aircraft, all on domestic routes in Norway, targeting a gradual expansion next year and a return to normal operations in 2022, albeit with a reduced short-haul and long-haul network.
Even with the ongoing financial restructuring, Norwegian will need additional cash to finance its eventual return to international markets, it said last month.
Airlines around the world have been hit hard by the pandemic's impact on travel, with many forced to turn to governments for state aid to avoid bankruptcy.
U.S. billionaire investor Warren Buffett last week said Berkshire Hathaway (N:BRKa) had sold its stakes in U.S. carriers in April, adding to the sense of crisis around the industry.