Norwegian Air seeks debt restructuring as coronavirus crisis grounds fleet

Norwegian Air is proposing to convert some of its debt into equity and to issue new shares as it seeks to stay in business following the COVID-19 outbreak that has grounded almost all of its fleet, the budget carrier said on Wednesday. By boosting its equity, the airline would also qualify for government guarantees of up to 3 billion Norwegian crowns ($292 million), which are dependent on the company reducing its ratio of debt to equity.

Growing rapidly in the last decade to become Europe's third-largest low-cost airline and the biggest foreign carrier serving New York and other major U.S. cities, Norwegian had accumulated debts and liabilities of close to $8 billion by the end of 2019. On March 16, the company announced temporary layoffs of 7,300 employees, about 90% of its workforce, and the following day called on Norway's government for help, saying it needed cash "within weeks, not months".

"Norwegian aims to strengthen its balance sheet by converting debt to equity to meet the requirements of the Norwegian state guarantee program and create a sustainable platform," it said in a statement on Wednesday. An extraordinary general meeting will be held on May 4 to vote on the plan, Norwegian said.

"The proposed measures are necessary in securing the next tranches of the Norwegian government state guarantee program," Chief Executive Jacob Schram said in a statement. "They are also necessary for the future of the company by strengthening the company's balance sheet," he added.

While Norwegian quickly qualified for access to 10% of the government guarantees, it must convince financial creditors to temporarily forego payments if it is to access the second tranche, worth 1.2 billion crowns. To access the final tranche, of 1.5 billion crowns, the company must also raise equity, the government has said. ($1 = 10.2693 Norwegian crowns) (Editing by Jane Merriman and Jan Harvey)