SAS Sells $537 Million of Shares to Finance Airliners

SAS Group, the Nordic region’s largest airline, is selling shares potentially valued at 3.5 billion Swedish kronor ($537 million) to buy new Airbus planes and cut its dependence on banks.

SAS will sell as many as 7 million preferred shares worth

3.5 billion kronor, the company said in a statement today. If that occurs, SAS would be the carrier selling the highest value of shares in western Europe in the past decade, with a $1.95 billion total -- including sales in 2009 and 2010 -- leapfrogging Air France KLM Group, according to data compiled by Bloomberg.

SAS said in June it will buy 12 new Airbus long-range jets valued at $3.3 billion to upgrade aging aircraft with more efficient models, seeking delivery of eight A350-900s and four A330-300s starting in 2015. Two years earlier, it ordered 30 A320neo planes with a list price of about 18 billion kronor.

“By issuing preference shares, SAS’s equity position will be strengthened,” the company said. Newer planes will create “an optimized fleet for more profitable production.”

The financing accord comes on top of an efficiency program, introduced in November 2012 and aimed to deliver 3 billion kronor in savings. SAS in December delayed earnings targets for fiscal 2015 by one year in the face of tougher markets and less business travel in Scandinavia.

Norwegian Pressure

Expansion of competitors including Norwegian Air Shuttle ASA has put pressure on SAS, with the Fornebu-based discount carrier ordering 222 airliners valued at 127 billion Norwegian kroner ($20.5 billion) a year ago. SAS has generated a cumulative net loss of more than $2.3 billion in the past 6 years, according to data collected by Bloomberg.

The initial preferred-shares offer is for 4 million shares, which may be raised to as many as 7 million, the company said. The subscription period runs from Feb. 10 through Feb. 20 for institutional investors, and through Feb. 19 for private investors in Denmark, Norway and Sweden, SAS said.

The preferred shares will be sold at 500 kronor apiece and carry one-tenth of a voting right compared with SAS common shares. They will be eligible for a dividend of 50 kronor, which can rise to 75 kronor.

The governments of Sweden, Denmark and Norway, as well as the Knut and Alice Wallenberg Foundation, which together hold

57.6 percent of the company’s shares and votes, support the transactions, SAS said. The offer requires approval at an annual general meeting on Feb. 18, and the new shares may start trading on March 7.

It may also sell as much as 2 billion kronor of bonds convertible into shares, and agreed on 150 million euros ($203 million) in financing with UBS AG, replacing existing revolving credit. The convertible bond replaces an existing one for 1.6 billion kronor.

Carnegie Investment Bank AB, Nordea Bank AB and Skandinaviska Enskilda Banken AB are acting as financial advisers, joint lead managers and joint bookrunners for the offer, while JPMorgan Chase & Co. is financial adviser for the convertible bond. Mannheimer Swartling Advokatbyra AB is serving as legal adviser.

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