Norwegian gets lifeline with Norway’s richest man backing

Bloomberg

Norwegian Air Shuttle ASA gained the backing of Norway’s richest man, providing some stability to the struggling discount carrier as it searches for a new suitor following IAG SA’s decision to abandon its eight-month pursuit.
The shares fell the most on record after Norwegian said it had raised 3 billion kroner ($353 million) in a rights issue underwritten by investors including shipping magnate John Fredriksen to avoid breaching financial covenants.
While the stock declined, the bonds advanced as investors welcomed the cash infusion, which eases concerns over Norwegian’s viability.
“I’ve known John Fredriksen for a long time, and we even have a CFO who has worked for Fredriksen,” Chief Executive Officer Bjorn Kjos told reporters in Oslo. “We’re very happy to have the Fredriksen group as a part of that guarantee consortium.”
Norwegian found cover just days after British Airways parent IAG said it had broken off talks on a potential takeover. The discounter said in a statement it’s no longer in active discussions with suitors, freeing the company to address its balance sheet. Kjos indicated Norwegian is still open to other potential buyers.
Asked about Deutsche Lufthansa AG, which held talks with Norwegian last year, and Ryanair Holdings Plc, which has denied speculation of its interest, Kjos declined to discuss specifics. “I can’t say who, I can only say that more than one interested party has contacted us,” he said, while praising IAG as “a very good company.”
IAG and Lufthansa declined to comment, while Ryanair didn’t respond to requests for comment. Shares of Norwegian Air were trading 11 percent lower after dropping as much as 30 percent in Oslo, near the company’s headquarters in Fornebu, Norway. The carrier’s bonds recovered losses recorded after IAG pulled out. Its 250 million euro of notes due December gained 13 cents on the euro to 96 cents, according to data compiled by Bloomberg.
IAG’s decision to walk away from the talks had spurred concerns about Norwegian’s finances, with analysts widely predicting that a capital increase was likely — though the rights issue is bigger than many had forecast. About 2.4 billion kroner of the total will be guaranteed by DNB Bank, Danske Bank and Fredriksen, who last year pulled off the painful restructuring of his offshore drilling company Seadrill Ltd.
Fredriksen, 74, has said he’s looking at new opportunities as he continues to diversify his wealth. Bloomberg estimates his net worth at $7.9 billion, with almost half consisting of cash and other assets. The Norwegian-born Cypriot citizen, made his fortune in shipping in the 1970s and 1980s.
Kjos, who rejected two previous offers from IAG, has been struggling to weather a cash crunch. His company is awash with capacity after one of the fastest growth spurts in aviation history, when a European fare war has depressed revenue.