The Norwegian government decided last week to guarantee up to 6 billion NOK ($540M) of airline loans, of which half would go to the Norwegian Air that provides much-needed connectivity within the mountainous country.
The package comes in three tranches, and guarantees are released when specific benchmarks with creditors are reached. The airline released a small cash infusion from the government on Tuesday.
Here’s how the guarantees are structured per Reuters (access their piece here):
A condition for receiving the first 300 million Norwegian crowns ($27.50 million) from Norway’s rescue package was that commercial lenders were willing to supply 10% of that amount while the government would provide the remaining 90%.
A tranche of 1.2 billion crowns is dependent on creditors postponing installments and scrapping interest payments for as long as the guarantee lasts.
Another of 1.5 billion crowns would require Norwegian to boost its equity, the government has said.
SAS and Wideroe are two other airlines benefiting from the Norway’s rescue package.
Norwegian has 58B NOK in liabilities ($5.3B) and practically no revenue stream as most flights are grounded, and 90% of the employees laid off. It is unclear when the current coronavirus pandemic is over and what demand there is then for air transportation.
The Norwegian government may guarantee 3B NOK of loans that represents only 5% of the liabilities. Not sure how this close to insignificant infusion will help unless the airline can significantly reduce and renegotiate its debt load?