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Norwegian stock price drops after new fundraising round

Scandinavian budget carrier Norwegian's share price has dropped by around 10% after the airline revealed it was seeking additional funding from investors, through a convertible bond issue and a release of new shares.

Norwegian says the transactions leave the airline "fully funded" through 2020 "and beyond", based on its current business plan.

Newly-appointed chief executive Geir Karlsen says that, while the airline is seeing results from efficiency measures, its liquidity has been hit by various factors.

These include the engine issues on its Boeing 787s, the grounding of the 737 Max, and reduction in credit-card acquirer capacity.

Norwegian sought the funds to provide working capital through the winter season.

"The actions we are now taking, are necessary to create financial headroom to make sure that we have sufficient liquidity as we enter the next chapter of Norwegian," says Karlsen.

Norwegian says it has raised around NKr2.5 billion ($273 million) in gross proceeds through the private placement – comprising 27.25 million new shares, just under 20% of its share capital – combined with a $150 million convertible bond issue.

Just over 5 million existing shares were also allocated during the private placement, the airline adds, sold for hedging purposes on behalf of certain investors in the convertible bond issue. It had been prepared to release up to 12.5 million of these existing shares, which are owned by HBK Holding and Folketrygdfondet.

Norwegian had also included an option to increase the bond issue to $175 million.

Both the private placement and the convertible bond issue received "significant interest" from investors, both current and new, claims Norwegian, adding that both were oversubscribed.

But the market has not reacted encouragingly to the additional fundraising, with Norwegian's share price falling by around 10% following the disclosure.

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