SAS (Scandinavian Airlines System), the Scandinavian national airline, has officially secured much-needed funding to continue operations. A United States bankruptcy court for the Southern District of New York has approved more than US$700 million in financing for the airline. The financing is in the form of a debtor-in-possession (DIP) agreement with funds managed by Apollo Global Management, and the terms are nearly identical to those announced by SAS on August 14, 2022.
In July this year, the Scandinavian carrier filed for Chapter 11 bankruptcy in the United States to continue operations while restructuring its debt commitment. The airline was allowed to apply in the United States as it serves Boston (BOS), Chicago (ORD), Los Angeles (LAX), Miami (MIA), New York (JFK), San Francisco ( SFO) and Washington (SAI). This process is designed for the company, in this case SAS, to reach an agreement with key stakeholders, receive a cash injection and restructure its debt.
The financing approved for this agreement is a special type of bridge financing used in partnership with revenues generated by SAS from its current operations. This will allow SAS to meet its obligations throughout the Chapter 11 process. In addition, due to court approval, an initial $350 million will be made available to SAS for ongoing operations. SAS thinks the Chapter 11 bankruptcy process will take them less than a year.
Scandinavian is not the first airline to use the Chapter 11 bankruptcy process to raise funds for continued operations and to restructure debt. Airlines such as LATAM, Aeromexico, Avianca and Philippine Airlines have also used this process. SAS hopes to complete its court-supervised process within a year. However, it took nearly two years for Aeromexico to emerge from the process and a year and a half for Avianca.