Denmark’s government has agreed to support Scandinavian carrier SAS through a debt-to-equity conversion, but has also signalled it will invest new capital into the struggling airline and potentially raise its shareholding.

The Danish finance ministry says the government will support the ‘SAS Forward’ restructuring programme for the carrier, following a partial commitment from the government of Sweden.

Under the Danish proposal, outlined in a multi-party agreement, the government will accept the conversion of its existing debts on market terms and will “contribute new equity” in order to maintain an SAS shareholding between 21.8% – the current level – and up to 30%.

The plan to maintain a “significant” minority shareholding, it says, and assumes a co-operative ownership agreement with “one or more” new majority shareholders emerges to ensure that the minority interest is protected and SAS maintains a strong Danish position.

SAS fuselage-c-SAS

Source: SAS

SAS has obtained support for its restructuring, to a degree, from both state owners

SAS finds itself in a “very serious situation”, says finance minister Nicolai Wammen. The agreement shows the government is “willing to assume its share of responsibility” to restore the airline.

“The state still wants to be a responsible and long-term co-owner of SAS for the benefit of Denmark’s international accessibility, Danish exports and business as well as Danish jobs,” adds Wammen.

He says the support agreement presupposes that all parties will make a “sufficient contribution” to SAS’s recovery and transformation into a financially-viable operator.

According to the agreement, the government will continue to respect “arm’s length” ownership, and that SAS will be allowed to continue functioning on a commercial basis with the board given the freedom to manage the company’s strategy and day-to-day operations.

SAS says it “appreciates” the Danish government’s decision, adding that it amounts to a “declaration of confidence and support” in the company’s restructuring plan, including the “necessary efficiencies” which must be put in place for its success.

Sweden’s government, which also holds 21.8% of SAS, has previously stated that it will accept the debt-to-equity swap but is not prepared to invest further capital in the company.