The European Commission has approved Danish and Swedish plans to contribute up to SEK 11 billion (approximately€1 billion) to the recapitalization of SAS. The measure was approved under the State aid Temporary Framework. The recapitalization measure is part of a larger recapitalization package, which also foresees a significant participation of private investors, including the conversion of outstanding privately-held debt instruments into equity.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “SAS plays a key role for the connectivity and economy of Scandinavian countries. As many other companies active in the aviation sector, SAS has been severely hit by the current crisis. With this measure, Denmark and Sweden will contribute up to €1 billion to SAS's recapitalization and help the airline weather the current crisis. At the same time, the Member States will be sufficiently remunerated for the risk taxpayers assume, and the support will come with strings attached to limit distortions of competition. I welcome the participation by private investors to the plan, as it limits the need for State aid, while contributing to the recovery of companies affected by the coronavirus outbreak.”
The Danish and Swedish recapitalization measure
Denmark and Sweden notified to the Commission, under the Temporary Framework, a State recapitalization of SAS of up to SEK 11 billion (approximately €1 billion), of which about SEK 6 billion (approximately €583 million) will be provided by Denmark and SEK 5 billion (approximately €486 million) by Sweden. The recapitalization by the two Member States comprises:
Around SEK 2 billion (approximately €194 million) equity participation through the subscription of new shares, shared between Denmark and Sweden;
Up to around SEK 3 billion (approximately €292 million) equity participation through the subscription and underwriting of new shares in a rights issue, shared between Denmark and Sweden; and
SEK 6 billion (approximately €583 million) newly issued State hybrid notes with the features of an equity instrument non-convertible into shares, of which SEK 2.5 billion (approximately €243 million) is allocated to Sweden and SEK 3.5 billion (approximately €340 million) is allocated to Denmark.Following the recapitalization, a revolving credit facility (on which Denmark and Sweden granted 90% public guarantees, which were approved by the Commission on 15 April 2020 and 24 April 2020) will be cancelled.
SAS is a major network airline operating in Denmark, Sweden and Norway. It has its main hub at Copenhagen airport and, under normal circumstances, provides two-thirds of intra- Scandinavian air connectivity. It also contributes to over 30% and 25% of Denmark's and Sweden's international traffic, respectively.
In the second quarter of 2020, SAS suffered substantial losses due to the coronavirus outbreak and the travel restrictions that Denmark, Sweden and other countries had to impose to limit the spread of the coronavirus. Despite the State aid already granted to the company by Denmark and Sweden (cases SA.56795, SA.57061 and SA.56774), the significant drop in travel demand and the measures implemented to limit the spread of the virus continue deteriorating the financial situation of the airline. As a result, SAS is currently facing a risk of default and insolvency.
The Commission concluded that the recapitalization measure will contribute to manage the economic impact of the coronavirus outbreak in Denmark and Sweden: the measure aims at restoring the balance sheet position and liquidity of SAS in the exceptional situation caused by the coronavirus pandemic, while maintaining the necessary safeguards to limit competition distortions. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the two Member States, in line with Article 107(3)(b) TFEU and the general principles as set out in the Temporary Framework.